Use the table below to answer the following questions Present Value of an Annuit

Question

Use the table below to answer the following questions Present Value of an Annuity of 1 Future Value of an Annuity of 1 496 596 896 1096 2.7751 2.7232 2.5771 2.4869 3.1216 3.1525 3.2464 3.3100 3.6299 3.5460 3.3121 3.1699 4.2465 4.3101 4.5061 4.6410 4.4518 4.3295 3.9927 3.7908 5.4163 5.5256 5.8666 6.1051 5.2421 5.0757 4.6229 4.3553 6.6330 6.8019 7.3359 7.7156 6.0021 5.7864 5.2064 4.8684 7.8983 8.14208.9228 9.4872 6.7327 6.4632 5.7466 5.3349 9.21429.549110.6366 11.4359 7.4353 7.1078 6.2469 5.7590 10.5828 11.0266 12.4876 13.5795 8.1109 7.7217 6.7101 6.1446 12.006112.5779 14.4866 15.9374 % 4% 5% 8% 10% 4 6 10 Alicia receives alimony payments every 6 months and the next payment is tomorrow. Median homes go for $650000 and she wants to save $357500 for 3 years. How much money should Alicia put away into an investment each time she receives alimony payments if she can get a 8% return a year? Select one: A. $69,361 B. $51,056 C. $55,061 D. $51,824

Explanation / Answer

In 3 years, Alicia wants $357500

The interest rate is 8%

Now since it is semi annual payment so Period = 3 X 2 = 6

Return % = 8%/2 =4%

The equation to be solved is:

A * FV of annuity at 4% for period 6 = $357500

A * 6.6330 = $357500

A = $ 53897.18076

The closest value is: C) $ 55,061

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