Question

Use the table below to answer the following question: Present Value of an Annuity of 1...

Use the table below to answer the following question:
Present Value of an Annuity of 1 Future Value of an Annuity of 1
Period 3% 4% 6% 8% 3% 4% 6% 8%
3 2.8286 2.7751 2.6730 2.5771 3.0909 3.1216 3.1836 3.2464
4 3.7171 3.6299 3.4651 3.3121 4.1836 4.2465 4.3746 4.5061
5 4.5797 4.4518 4.2124 3.9927 5.3091 5.4163 5.6371 5.8666
6 5.4172 5.2421 4.9173 4.6229 6.4684 6.6330 6.9753 7.3359
7 6.2303 6.0021 5.5824 5.2064 7.6625 7.8983 8.3938 8.9228
8 7.0197 6.7327 6.2098 5.7466 8.8923 9.2142 9.8975 10.6366
9 7.7861 7.4353 6.8017 6.2469 10.1591 10.5828 11.4913 12.4876
10 8.5302 8.1109 7.3601 6.7101 11.4639 12.0061 13.1808 14.4866

Alicia receives alimony payments every 6 months and the next payment is tomorrow. Median homes go for $650000 and she wants to save $357,500 for 3 years. How much money should Alicia put away into an investment each time she receives alimony payments if she can get a 6% return a year?

$56,147
$53,659
$49,445
$66,872

Homework Answers

Answer #1

Formula for FV of annuity due is:

FV = (1+r) x P x [(1+r) n – 1/r]

Or

FV = (1+r) x P x FVIFA (r, n)

FV = Future value of annuity due = $ 357,500

P = Periodic cash deposits

r = Rate per period = 6 % p.a. or 0.06/2 = 0.03 semiannually

n = Number of periods = 3 years x 2 periods = 6 periods

Substituting the values in above equation and solving for P, we get periodic deposits as:

$ 357,500 = (1+0.03) x P x FVIFA (3 %, 6)

$ 357,500 = (1.03) x P x 6.4684

$ 357,500 x (1.03) = P x 6.4684

$ 347087.378640777 = P x 6.4684

P = $ 347087.378640777/6.4684

P = $ 53,658.92317122890 or $ 53,659

Hence option “$ 53,659” is correct answer.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Use the table below to answer the following question: Present Value of an Annuity of 1...
Use the table below to answer the following question: Present Value of an Annuity of 1 Future Value of an Annuity of 1 Period 3% 4% 6% 8% 3% 4% 6% 8% 3 2.8286 2.7751 2.6730 2.5771 3.0909 3.1216 3.1836 3.2464 4 3.7171 3.6299 3.4651 3.3121 4.1836 4.2465 4.3746 4.5061 5 4.5797 4.4518 4.2124 3.9927 5.3091 5.4163 5.6371 5.8666 6 5.4172 5.2421 4.9173 4.6229 6.4684 6.6330 6.9753 7.3359 7 6.2303 6.0021 5.5824 5.2064 7.6625 7.8983 8.3938 8.9228 8 7.0197 6.7327...
Question 1 Part A and B Part Present and future value tables of $1 at 3%...
Question 1 Part A and B Part Present and future value tables of $1 at 3% are presented below: N FV $1 PV $1 FVA $1 PVA $1 FVAD $1 PVAD $1 1 1.03000 0.97087 1.0000 0.97087 1.0300 1.00000 2 1.06090 0.94260 2.0300 1.91347 2.0909 1.97087 3 1.09273 0.91514 3.0909 2.82861 3.1836 2.91347 4 1.12551 0.88849 4.1836 3.71710 4.3091 3.82861 5 1.15927 0.86261 5.3091 4.57971 5.4684 4.71710 6 1.19405 0.83748 6.4684 5.41719 6.6625 5.57971 7 1.22987 0.81309 7.6625 6.23028 7.8923...
Present and future value tables of $1 at 3% are presented below: N FV $1 PV...
Present and future value tables of $1 at 3% are presented below: N FV $1 PV $1 FVA $1 PVA $1 FVAD $1 PVAD $1 1 1.03000 0.97087 1.0000 0.97087 1.0300 1.00000 2 1.06090 0.94260 2.0300 1.91347 2.0909 1.97087 3 1.09273 0.91514 3.0909 2.82861 3.1836 2.91347 4 1.12551 0.88849 4.1836 3.71710 4.3091 3.82861 5 1.15927 0.86261 5.3091 4.57971 5.4684 4.71710 6 1.19405 0.83748 6.4684 5.41719 6.6625 5.57971 7 1.22987 0.81309 7.6625 6.23028 7.8923 6.41719 8 1.26677 0.78941 8.8923 7.01969 9.1591...
Question 15 Jim Scott invested  $5000  four times a year in an annuity due at New York Securities...
Question 15 Jim Scott invested  $5000  four times a year in an annuity due at New York Securities for a period of  4  years at an interest rate of  8% compounded quarterly. Using the ordinary annuity table , calculate the total value of the annuity due at the end of the  4 -year period. Ordinary annuity table: Compound sum of an annuity of $1 Period 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000...
Present and future value tables of $1 at 3% are presented below: Micro Brewery borrows $240,000...
Present and future value tables of $1 at 3% are presented below: Micro Brewery borrows $240,000 to be repaid in equal installments over a period of seven years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment? -------------------------------------------------------------------------------------------------------- Present and future value tables of $1 at 3% are presented below: N FV $1 PV $1 FVA $1 PVA $1 FVAD $1 PVAD $1 1...
7.   Present and future value tables of $1 at 3% are presented below: N            FV $1    ...
7.   Present and future value tables of $1 at 3% are presented below: N            FV $1     PV $1     FVA $1 PVA $1 FVAD $1              PVAD $1 1             1.030000             0.97087               1.0000   0.97087               1.0300   1.00000 2             1.06090               0.94260               2.0300   1.91347               2.0909   1.97087 3             1.09273               0.91514               3.0909   2.82861               3.1836   2.91347 4             1.12551               0.88849               4.1836   3.71710               4.3091   3.82861 5             1.15927               0.86261               5.3091   4.57971               5.4684   4.71710 6             1.19405               0.83748               6.4684   5.41719               6.6625   5.57971 7             1.22987               0.81309               7.6625   6.23028               7.8923   6.41719 8             1.26677               0.78941               8.8923   7.01969              ...
CHOOSE THE CORRECT ANSWER: 1) PVC Corporation is considering an investment proposal in which a technology...
CHOOSE THE CORRECT ANSWER: 1) PVC Corporation is considering an investment proposal in which a technology investment of $10,000 would be required. The investment would provide cash inflows of $2,000 per year for six years. The technology investment will have no salvage value at the end of six years. If the company's discount rate is 10%, the investment's net present value is closest to (Ignore income taxes.): (See the time value of money BELOW THE PAGE.) A. $1,289 B. $(1,289)...
Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1...
Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 Your potential project has a required rate of return of 9%. The project costs $350,000 and is expected to generate cash inflows of $140,000 at the end of each year for three years. The net present value of this project is A. $35,436. B. $4,340. C. $354,340. D. $70,000.
Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an annuity of $1,...
Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,050,000 and will last 10 years. Evee Cardenas is interested in investing...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT