Question1: Stephanie Watson plans to make the following investment beginning nex

Question

Question1:

Stephanie Watson plans to make the following investment beginning next year. She will invest $2,550 in each of the next three years, and will then make investments of $3,650, $3,725, $3,875, and $4,000 over the following four years. If the investments are expected to earn 12.10 percent annually, how much will Stephanie have at the end of the seven years?(Round answer to 2 decimal places, e.g. 15.25.)

Question 2:

Jeremy Denham plans to save $6,000 every year for the next eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. If his investment in a mutual fund will earn him 9.95 percent annually, how much will he have saved in eight years when he buys his house? (Round intermediate calculations to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25.)

Explanation / Answer

Question 1:

Present value = 14,280.63

Future value = 14,280.63*1.1217 = 31,767.76

Question 2:

PV = 0

PMT = 6000

N = 8

rate = 9.95%

use FV funciton in Excel with type as 1

future value of the amount = 75,305.67

12.10% Cash flows Year Discounted CF                            -   0 0.00               2,550.00 1 2274.75               2,550.00 2 2029.22               2,550.00 3 1810.19               3,650.00 4 2311.38               3,725.00 5 2104.25               3,875.00 6 1952.71               4,000.00 7 1798.13

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