Wiseman Video plans to make four annual deposits of $4,000 each to a special bui

Question

Wiseman Video plans to make four annual deposits of $4,000 each to a special building fund. The funds assets will be invested in mortgage instruments expected to pay interest at 12% on the funds balance. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Using the appropriate annuity table, determine how much will be accumulated in the fund on December 31, 2016, under each of the following situations.

    

1. The first deposit is made on December 31, 2013, and interest is compounded annually.

      
  

2. The first deposit is made on December 31, 2012, and interest is compounded annually.

        

rev: 10_29_2013_QC_38306

3. The first deposit is made on December 31, 2012, and interest is compounded quarterly.

      

4.

The first deposit is made on December 31, 2012, interest is compounded annually, andinterest earned is withdrawn at the end of each year.

Explanation / Answer

2)the first deposit is made on December 31st 2012 and interest is compounded annually?

Using the fv of $1 chart to calculate fund balance

deposit date

     i=

     n=

deposit

fund balance 12/31/2016

12/31/2012

1%

4

$4000

4000*1.0406=4162.4

12/31/2013

1%

3

$4000

4000*1.0303=4121.2

12/31/2014

1%

2

$4000

4000*1.0201=4080.4

12/31/2015

1%

1

$4000

4000*1.0100=4040

Total=$16,404

Notes: interest is calculated quarterly   i=12/12=1%

N=4 number of years ;1st 2nd 3rd 4th year implies 4,3,2,1

3)the first deposit made on December 31st 2012and interest is compounded annually?

Using the fv of $1 chart to calculate fund balance

deposit date

     i=

     n=

deposit

fund balance 12/31/2016

12/31/2012

3%

16

$4000

4000*1.60471=6418.84

12/31/2013

3%

12

$4000

4000*1.42576=5703.04

12/31/2014

3%

8

$4000

4000*1.26677=5067.08

12/31/2015

3%

4

$4000

4000*1.12551=4502.04

Total =$21,690

Notes: interest is calculated quarterly   i=12/4=3%

N=4 number of years ;1st 2nd 3rd 4th year implies 16,12,8,4

deposit date

     i=

     n=

deposit

fund balance 12/31/2016

12/31/2012

1%

4

$4000

4000*1.0406=4162.4

12/31/2013

1%

3

$4000

4000*1.0303=4121.2

12/31/2014

1%

2

$4000

4000*1.0201=4080.4

12/31/2015

1%

1

$4000

4000*1.0100=4040

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