Question 4 Answer each of the following independent questions. Ignore personal i
ID: 2430700 • Letter: Q
Question
Question 4 Answer each of the following independent questions. Ignore personal income taxes.Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)
Required: Suppose you invest $4,200 in an account bearing interest at the rate of 14 percent per year. What will be the future value of your investment in five years? Your best friend won the state lottery and has offered to give you $11,700 in five years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 12 percent annual interest. What is the present value of your friend’s future gift? In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $69,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 6 percent per year in order to accumulate the $69,500 purchase price? You have estimated that your educational expenses over the next four years will be $14,700 per year. How much money do you need in your account now in order to withdraw the required amount each year? Your account bears interest at 10 percent per year.
1. The future value of the assessment 2. The present value of the gift 3. Required investment per year 4. Amount required Future Value and Present Value Tables Table IV
Explanation / Answer
Answer to Question 1:
Amount Invested = $4,200
Interest Rate = 14%
Period = 5 years
Future Value = $4,200 * FV of $1 (14%, 5)
Future Value = $4,200 * 1.925
Future Value = $8,085
Answer to Question 2:
Annual Gift = $11,700
Period = 5 years
Interest Rate = 12%
Present Value of Gift = $11,700 * PV of $1 (12%, 5)
Present Value of Gift = $11,700 * 0.567
Present Value of Gift = $6,634
Answer to Question 3:
Cost of Cabin = $69,500
Period = 4 years
Interest Rate = 6%
Annual Deposit = $69,500 / FVA of $1 (6%, 4)
Annual Deposit = $69,500 / 4.375
Annual Deposit = $15,886
Answer to Question 4:
Annual Expense = $14,700
Interest Rate = 10%
Period = 4 years
Amount Invested today = $14,700 * PVA of $1 (10%, 4)
Amount Invested today = $14,700 * 3.170
Amount Invested today = $46,599
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.