The cost of an automobile is $10,000. If the interest rate is 5%, how much would

Question

The cost of an automobile is $10,000. If the interest rate is 5%, how much would you I have to set aside now to provide this sum in five years? B. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you set aside today to cover these bills? C. You have invested $60.476 at 8%. After paying the above school fees, how much would you remain at the end of six years? Answers: Calculation A. PV $7,835.26 B. Annuity factor C Set aside amount C Remainder after 6 years C Annuity factor is the present val

Explanation / Answer

A PV= 10000/1.05^5= $7835.26

B. amout set aside=12000PVIFA(8%,6)

= 12000x4.6229

= $55474.56

Annuty factor= 4.6229

amout set aside= $55474.56

C. 60476x1.08^6= $95967.81

Rem. after 6 years= 95967.81-55474.56= $40493.25

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