Question

Your goal is to have $20,000 in your bank account by the end of five years. If the interest rate remains constant at 7% and you want to make annual identical deposits, how much will you need to deposit in your account at the end of each year to reach your goal? (Note: Round your answer for PMT to two decimal places.)

$3,825.62

$3,477.84

$3,130.06

$2,434.49

If your deposits were made at the beginning of each year rather than an at the end, by how much would the amount of your deposit change if you still wanted to reach your goal by the end of five years? (Note: Round your answer for PMT to two decimal places.)

$216.14

$227.52

$284.40

$193.39

You have a partnership stake in a business that pays you equal payments of $3,000 at the end of each year for the next six years. If the annual interest rate stays constant at 9%, what is the value of these payments in today’s dollars? Round your answer to the nearest whole dollar.

$13,458

$14,669

$16,823

$11,439

You found out that now you are going to receive payments of $5,000 for the next 13 years. You will receive these payments at the beginning of each year. The annual interest rate will remain constant at 10%. What is the present value of these payments? Round your answer to the nearest whole dollar.

$35,517

$39,069

$31,255

$52,743

You have deposited $3,750 into an account that will earn an interest rate of 15% compounded semiannually. How much will you have in this account at the end of 14 years?

$26,533.90

$28,409.81

$32,671.28

$19,886.87

Answer 1

1]

Amount to deposit each year is calculated using PMT function in Excel :

rate = 7% (interest rate)

nper = 5 (number of yearly deposits)

pv = 0 (beginning amount in account is zero)

fv = 20000 (required amount in account at end of 5 years)

PMT is calculated to be $3,477.81

2]

Amount to deposit each year is calculated using PMT function in Excel :

rate = 7% (interest rate)

nper = 5 (number of yearly deposits)

pv = 0 (beginning amount in account is zero)

fv = 20000 (required amount in account at end of 5 years)

type = 1 (each deposit is made at the beginning of the year)

PMT is calculated to be $3,250.29

Difference = $3,477.81 - $3,250.29 = $227.52

3]

Value today is calculated using PV function in Excel :

rate = 9% (interest rate)

nper = 6 (number of yearly payments)

pmt = 3000 (yearly payment)

PV is calculated to be $13,458

4]

Value today is calculated using PV function in Excel :

rate = 10% (interest rate)

nper = 13 (number of yearly payments)

pmt = 5000 (yearly payment)

fv = 0 (no lump sum amount received at end of 13 years)

type = 1 (each payment is made at the beginning of the year)

PV is calculated to be $39,068