Question

A) Suppose payments were made at the end of each quarter into an ordinary annuity earning interest at the rate of 10% per year compounded quarterly. If the future value of the annuity after 5 years is $50,000, what was the size of each payment?

B) The Pirerras are planning to go to Europe 3 years from now and have agreed to set aside $150/month for their trip. If they deposit this money at the end of each month into a savings account paying interest at the rate of 2%/year compounded monthly, how much money will be in their travel fund at the end of the third year? (Round your answer to the nearest cent.)

Answer #1

**Answer:**

**A)**

**Future Value = $ 50,000**

**Rate of Interest = 10 % = r = 0.10**

**n = 4**

**t = 5 Years**

**Therefore, Payment = $ 1,957.36**

**B)**

**PMT = $ 150**

**Rate of Interest = 2 % = r = 0.02**

**n = 12 (Compounded Monthly)**

**t = 3 Years**

**Therefore, A = $ 5,670**

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