7A.) Eric is considering buying a car. He can either purchase the car outright o

Question

7A.) Eric is considering buying a car. He can either purchase the car outright or make 5 annual payments of $10,000 at the end of each year. If the interest rate is 7%, how much is the outright purchase price?

A. $41,002

B. $14,025.50

C. $7,129.90

D.$ 57,863.70

7B). Mark would like to retire in 25 years. If he deposits $10,000 at the end of each of the next 25 years into an account earning 7% interest, how much will he have in this account at the end of 25 years?

A. $291,339.50

B. $632,490.40

C. $250,000

D. $758,292. 17

Explanation / Answer

= $41,002

= $632,490.40

1. 10,000 * 4.10020 ( PV of annuity where t = 5 and I =7%)

= $41,002

1. 10,000 * 63.24904 ( FV of annuity where t = 25 periods , I =7%)

= $632,490.40

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