1. On January 1 a company determines it will need a new computer system costing
ID: 2435095 • Letter: 1
Question
1. On January 1 a company determines it will need a new computer system costing $60,000 three years from now. It desires to make 3 equal deposits into its bank each of the next three December 31. If the bank is paying 5% interest compounded annually on such deposits, calculate the amount of the deposit that needs to be made at the end of each of the next 3 years.
A. $22,032
B. $19,033
C. $20,000
D. $19,463
2. On January 1 a company determines it will need a new computer system costing $60,000 three years from now. It desires to make a single deposit into its bank today, January 1, that will grow to $60,000 three years from now. If the bank is paying 5% interest compounded annually on such deposits calculate the amount of the deposit that needs to be made today.
A. $57,143
B. $51,831
C. $54,422
D. $49,566
Explanation / Answer
1 Here the amount of annuity has to be found Given : i= 5 % n= 3 FV of Annuities = 60,000 PMT or Annuity = ? From the Annuities Table FVF-OA(3,5%) = 3.1525 PMT * FVF-OA(3,5%) = 60,000 PMT *3.15 = 60,000 PMT = 60,000 / 3.1525 PMT = 19,033 2 Here the Present Value of a single sum has to be found i= 5 % n= 3 FV = 60,000 PV = ? PVF(3,5%)=0.864 PV = 60,000* 0.864 =51,831 Hence, the Amount of Deposit that needs to be made today = 51,831
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