Question

A) Suppose payments were made at the end of each quarter into an ordinary annuity earning...

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.)

Homework Answers

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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