(Comprehensive problem) You would like to have $70,000 in 15 years. To accumulat
ID: 2810322 • Letter: #
Question
(Comprehensive problem) You would like to have $70,000 in 15 years. To accumulate this amount, y to deposit an equal sum in the bank each year that will earn 6 percent interest co payment will be made at the end of the year mpounded annually. Your first a. How much must you deposit annually to accumulate this amount? b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should the lump-sum deposit be? (Assume you can earn 6 percent on this deposit) C. At the end of year 5, you will receive $20,000 and deposit it in the bank in an effort to reach your goal of deposit be? (Assume you can earn 6 per d of year 15. In addition to the lump-sum deposit, how much must you invest in 15 equal annual deposits to reach your goal? (Again, assume you can earn 6 percent on this deposit)Explanation / Answer
a)
n=15
rate =0.06
FV=70,000
=PMT(0.06,15,0,-70000)
Using excel pmt function:
=PMT(0.06,15,0,-70000)
=$3,007.39
b)For a lumpsum:
n=15
pmt=0
FV=70000
=PV(0.06,15,0,70000)
=$29,208.55
c) Value of 20,000 at present is 20000/(1.06^5)=$14,945.16
Hence PV=-14945.16
FV=70,000
rate =0.06
n=15
Using excel pmt function:
.=PMT(0.06,15,-14945.1635,70000)
=$1,468.60
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