It is now January 1. You plan to make a total of 5 deposits of $300 each, one ev

ID: 2659186 • Letter: I

Question

It is now January 1. You plan to make a total of 5 deposits of $300 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 8% but uses semiannual compounding. You plan to leave the money in the bank for 5 years. How much will be in your account after 5 years? Round your answer to the nearest cent.
$
You must make a payment of $1,776.63 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 14% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
$

It is now January 1. You plan to make a total of 5 deposits of $300 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 8% but uses semiannual compounding. You plan to leave the money in the bank for 5 years. How much will be in your account after 5 years? Round your answer to the nearest cent.
$
You must make a payment of $1,776.63 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 14% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
$

It is now January 1. You plan to make a total of 5 deposits of $300 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 8% but uses semiannual compounding. You plan to leave the money in the bank for 5 years. How much will be in your account after 5 years? Round your answer to the nearest cent.
$
You must make a payment of $1,776.63 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 14% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
$

Hi,

Please find the answers as follows:

Part A:

PMT = 300 (indicates the amount of deposit)

Rate = 8%/2 = 4% (indicates the rate of interest with semi-annual compounding)

Nper = 5*2 = 10 (indicates the period over which the deposits are made)

PV = 0 (indicates the present value of any deposit which is 0 in this case)

Type = 1(indicates the type of annuity which is annuity due in this case since the deposits are made at the beginning)

FV = ? (indicates the value to be calculated)

Future Value at the End of 5 Years = FV(Rate,Nper,PMT,PV,Type) = FV(4%,10,300,0,1) = 3745.91 or 3746

Part B:

FV = 1776.63

Nper = 5

Rate = 14%/4

PV = 0

Type =1

PMT = ?

Size of Payment = PMT(Rate,Nper,PV,FV,Type) = PMT(14%/4,5,0,1776.63,1) = 321.10 or 321

Thanks.

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