13.For the next 5 years, you decide to place $1,252 in equal year-end deposits i
ID: 2637233 • Letter: 1
Question
13.For the next 5 years, you decide to place $1,252 in equal year-end deposits into a savings account earning 6.62 percent per year. How much money will be in the account at the end of that time period?
Rond the answer to two decimal places.
14. What is the present value of the following annuity? $1,038 every year at the end of the year for the next 12 years, discounted back to the present at 8.67 percent per year, compounded annually?
15. You have accumulated some money for your retirement. You are going to withdraw $99,046 every year at the end of the year for the next 17 years. How much money have you accumulated for your retirement? Your account pays you 7.79 perecent per year, compounded annually. To answer this question, you have to find the present value of these cash flows.
ROund the answer to two decimal places.
Explanation / Answer
Answer:
13. Formula for compound interest = A= P (1+r/n)t
therefore, A= 1252 ( 1+ 0.0662/1)5
Hence, A = $1725.03
here. A= Amount compounded at the end of t period, P= Principal value, r= rate of interest divided by 100, n= number of times compounded in a year , t= no. of years, oe period for which amout is compounded.
Therefore, At the end of the period. there will be $1,725.03 in the account.
14. Present value of Annuity(PVA) = P* ( 1- [ 1+i ]-n / i)
Where, P= periodic payments, i = interest rate divided by 100, n = no. of years for which amount is invested.
Hence PVA = 1038 * ( 1- [ 1+0.0867]-12/0.0867)
Hence, PVA = $7,558.01
15. Present value of Annuity(PVA) = P* ( 1- [ 1+i ]-n / i)
Where, P= periodic payments, i = interest rate divided by 100, n = no. of years for which amount is invested.
Hence PVA = 99046 * ( 1- [ 1+0.0779]-17/0.0779)
Hence, PVA = $916,256.71
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