1. how much should be deposited now at 8% interest, compounded semiannually, to
ID: 2743850 • Letter: 1
Question
1. how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the Beginning of each six months, for 2 years.
2.Johnson's Plumbing wishes to pay off a debt of $21,000 in 6 years. What amortization payment would they need to make every three months, at 6% interest compounded quarterly?
3.Eric must pay off a loan of $3,500 in 5 years. Use the appropriate formula to find the amortization payment he would need to make each six months, at 12% interest compounded semiannually.
4.Kareem wants to have $500 at the end of every year for 20 years. The bank pays 11% interest, compounded annually. Kareem calculates that the present value of the ordinary annuity is $3,981.67. What would be the present value if payments were to be received at the BEGINNING of every period rather than the end?
3.Eric must pay off a loan of $3,500 in 5 years. Use the appropriate formula to find the amortization payment he would need to make each six months, at 12% interest compounded semiannually.
4.Kareem wants to have $500 at the end of every year for 20 years. The bank pays 11% interest, compounded annually. Kareem calculates that the present value of the ordinary annuity is $3,981.67. What would be the present value if payments were to be received at the BEGINNING of every period rather than the end?
Explanation / Answer
1) initially we find present vlaue of $400 annuity for 2 years at 8% interest.
This can be found using pv formulae in excel
=pv(rate,nper,pmt,fv,type)
=pv(8%/2,2*2,400,,1)
=$1510.04
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