(Round answer to 2 decimal places, e.g. 15.25.) a.You are a freshman in college

Question

(Round answer to 2 decimal places, e.g. 15.25.)

a.You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $882, $662, $756, and $811. If the account pays 5.53 percent annually, how much will you have at the end of four years?

b. and if you borrowed some money from your friend and promised to repay him the amounts of $1,269, $1,390, $1,825, $1,316, and $1,289 over the next five years. If the friend normally discounts investment cash flows at 6.4 percent annually, how much did you borrow?

Explanation / Answer

b.

So the amount borrowed initially was $ 5,907.62

Year Opening balance Fresh savings Total Interest @ year end @ 5.53% Year end 1 $ -   $ 882 $ 882 $ 49 $ 931 2 $ 931 $ 662 $ 1,593 $ 88 $    1,681 3 $ 1,681 $ 756 $ 2,437 $ 135 $    2,572 4 $ 2,572 $ 811 $ 3,383 $ 187 $    3,570 $ 3,111 $ 459

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