Question

: A father wants to set up a bank account that will pay his daughter $(12,000) at the end-of-quarter (EOQ) 4 and $(24,000) at EOQ 8. He will fund this account by making quarterly payments of $A from the present (time zero) through EOQ 7.

If the quarterly percentage rate is 2%, what is the value $A that must be deposited into the account?

please i want the result by hand step by step not excel

thanks in advance

Answer 1

• Like the answer and comment for query.
• We will first calculate Future value at EOQ 8 of amount to be paid to daughter at EOQ 4 & EOQ 8:
• Future Value at EOQ 8
  = Value to be paid at EOQ 8 + ( Value to be paid at EOQ 4 * FVIF(2%,4 quarters))
  =$24,000 + ($12,000*(1.02^4))
  =$ 24,000 + $ 12,990
  =$ 36,990
• Now divide above Future value at EOQ 8 by FVAF(2%,7 quarters) which will be calculated by hand using below formula:
  = ((1+r)^n - 1 ) / r
  = ((1.02^8)-1) / 0.02
  = 8.5830
• Value of X will be
  = $36,990 / 8.5830
  = $4309.68
• Kindly upvote.Thanks.