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.

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