Jessica wants to accumulate $11,000 by the end of 4 years in a special bank acco

Question

Jessica wants to accumulate $11,000 by the end of 4 years in a special bank account, which she had opened for this purpose. To achieve this goal, Jessica plans to deposit a fixed sum of money into the account at the end of the month over the 4-year period. If the bank pays interest at the rate of 5% per year compounded monthly, how much does she have to deposit each month into her account? (Round your answer to the nearest cent.) $ __________ Carl is the beneficiary of a $23,000 trust fund set up for him by his grandparents. Under the terms of the trust, he is to receive the money over a 6-year period in equal installments at the end of each year. If the fund earns interest at the rate of 5%/year compounded annually, what amount will he receive each year? (Round your answer to the nearest cent.) $ _________ The management of Gibraltar Brokerage Services anticipates a capital expenditure of $24,000 in 4 years for the purchase of new computers and has decided to set up a sinking fund to finance this purchase. If the fund earns interest at the rate of 2%/year compounded quarterly, determine the size of each (equal) quarterly installment that should be deposited in the fund. (Round your answer to the nearest cent.) $ __________

Explanation / Answer

Solution:

(9) Given that

Future value = $11,000 ( accumulation)

rate of interset = r = 5% = 0.05

compunded mothly therefore n = 12

time = 4 year

using formula

Future Value = PMT x (((1+r/n)nt-1)/(r/n))

11000 = PMT (((1+0.05/12)12*4-1)/(0.05/12))

PMT = 11000/53.01488 = $ 207.49

Answer: she has to deposit each months $207

(10)'

Present Value = $ 23000 ( deposited for Carl )

rate of intrest =5% = 0.05compunded annually

and n = 1

and t= 6

using formula

PV = PMT ( 1-(1+r/n)-nt)/(r/n)

23000 = PMT (1-(1+0.05)-6)/(0.05/1)

PMT = $ 4531.40

he will recive $ 4531.40 at end of each year

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