Question

Instructions: use the correct Compound interest table to solve

-Future value of 1 (future value of a single sum)

-Present value of 1 (present value of a single sum)

-Future value of an ordinary annuity of 1

-Present value of an ordinary annuity of 1

-Present value of an annuity Due of 1

A. If $4,000 is deposited into an investment account yielding 10% every 6 months starting on 1/1/2018, what amount will be available in the investment account in 4 years.

B. If Kim wants to withdraw $4,000/month every month for 2 years, how much does she have to deposit into a savings account yielding 12% per year, now.

C. Joseph bought a boat on 20 installments at 24% interest on 1/1/2020. He agreed to pay $2,000/month from 3/31/2020 for 20 months. What is the price of the boat? (PV of deferred payments)

D. Tom and Mary have saved $100,000 to finance their daughter Jenny’s college education. They deposited the money in the Arrowhead Savings and Loan Association, where it earns 5% interest compounded semiannually. What equal amounts can their daughter withdraw at the end of every 6 months during her 4 college years, without exhausting the fund?

E. Jenny bought a rental property for $900,000 and leased it for 3 years. Rents will be paid at the beginning of each month and the residual value after 3 years will be $700,000. To earn 8% rate of return per year on this lease, how much rent/month should be charged?

F. Coyote Inc. issues $5,000,000 of 6% bonds due in 5 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 4%. What amount will Coyote receive when it issues the bonds?

Answer 1