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

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