1. Five thousand dollars is deposited in an account that pays 6 percent interest

Question

1. Five thousand dollars is deposited in an account that pays 6 percent interest per year. Two years from today, another $5.000 is deposited. Five years from today. $10.000 is withdrawn from the account. How much money is in the account 6 years from today? a. SO b. $2,646 c. $2.805 d. $3,056 WILEY The owner of a cemetery plans to offer a perpetual care service for grave sites. The owner estimates that it will cost $120 per year to maintain a grave site. If the interest rate is 8 percent, what one-time fee should the owner charge for the perpetual care service? a. $96 b. $120 c. $1,500 d. $12,000

Explanation / Answer

1)

Year Cash flows FVF@6% Future value 0 $           5,000              1.419 $                 7,093 1 $                  -                1.338 2 $           5,000              1.262 $                 6,312 3 $                  -                1.191 $                        -   4 $                  -                1.124 $                        -   5 $       (10,000)              1.060 $            (10,600) 6 $                  -                1.000 $                        -   Future value after 6 years $                 2,805

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