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    Future Value of an Annuity

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    To save money, you want to begin contributing money to a risky brokerage account. Your plan is to make 4 contributions to the brokerage account. Each contribution will be $5,000 and each will be made at the beginning of each quarter beginning now and until the end of the year (the first immediately and then every 3 months). Assume that the account pays an 8% quarterly return with monthly compounding. How much money do you expect to have in the account immediately after making the last deposit?
    possible answers:
    a)20,938.67 b)19,784.21 c)19,021.54
    d)26,546.36 e)25,369,14 f)22,602.32
    g)22,215.54 h)23,598.54 i)24,879.73
    j)21,791.64

    © BrainMass Inc. brainmass.com December 24, 2021, 5:06 pm ad1c9bdddf
    https://brainmass.com/business/annuity/future-value-annuity-28624

    SOLUTION This solution is FREE courtesy of BrainMass!

    Answer: f)22,602.32

    Quarterly interest rate= 8%
    Therefore monthly interest rate with monthly compounding= 2.6667% =8%/3)

    Compounding rate= 2.6667%
    Quarter Dposit at the beginning of Month No of months for which cash is invested FV factor Cash deposit FV of cash flow at the beginning of fourth quarter
    1 1 9 1.267262 5000 6336.31
    2 4 6 1.171056 5000 5855.28
    3 7 3 1.082153 5000 5410.77
    4 10 0 1 5000 5000.00
    Total= 22602.36

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 5:06 pm ad1c9bdddf>
    https://brainmass.com/business/annuity/future-value-annuity-28624

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