Using the appropriate Time Value of Money table (A)Carla Lopez deposits $10460 a

Question

Using the appropriate Time Value of Money table (A)Carla Lopez deposits $10460 a year into her retirement account. If these funds have an average earning of 4 percent over the 15 years until her retirement, what will be the value of her retirement account?(B)If a person spends $19 a week on coffee (52 weeks in a year), what would be the future value of that amount over 9 years if the funds were deposited in an account earning 7 percent?(C)A financial company that advertises on television will pay you $57,000 now for annual payments of $9,300 that you are expected to receive for a legal settlement over the next 9 years. Assume you estimate the time value of money at 12 percent.What is the present value?Would you accept this offer?

Explanation / Answer

A)

Future value of annuity = P×[(1+r)^n-1]÷r

r is interest rate

P is payment per period

n is number of payments

= $10,460×[(1+4%)^15-1]÷4%

Value of retirement account = $209,447

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