You need $25,356 at the end of 9 years, and your only investment outlet is an 9

Question

You need $25,356 at the end of 9 years, and your only investment outlet is an 9 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning o he first year. Use p en and p en ? for an approximate answer, but a culate our na an er using e orm aan financial a culator methods a. What single payment could be made at the beginning of the first year to achieve this objective? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Single payment made b. What amount could you pay at the end of each year annually for 9 years to achieve this same objective? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Amount to be paid

Explanation / Answer

a. Single payment made $ 11,674.61 Working: Present Value of 1 = (1+i)^-n Where, = (1+0.09)^-9 i 9% = 0.460428 n 9 Present Value of future amount = Future amount x Present Value of 1 = $       25,356 x 0.460428 = $ 11,674.61 b. Amount to be paid $ 1,947.31 Working: a. Future Value of annuity of 1 = (((1+i)^n)-1)/i Where, = (((1+0.09)^9)-1)/0.09 i 9% =         13.0210 n 9 b. Annual required amount = Future Value required/Future Value of annuity of 1 = $       25,356 /    13.0210 = $   1,947.31

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.