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    Present Value of Ordinary Annuity

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    1.) On January 1, 2004, Carly Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $30,000 at 9% each January 1 beginning in 2004. What will be the balance in the fund, within $10, on January 1, 2009 ( one year after the last deposit)? The following 9% Interest factors may be used.

    Present Value of Ordinary Annuity Future Value of Ordinary Annuity
    4 periods 3.2397 4.5731
    5 periods 3.8897 5.9847
    6 periods 4.4859 7.5233

    2.) Your uncle promises to give you $550 per quarter for the next five years starting today. How much is his promise worth right now if the interest rate is 8% compounded quarterly?

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    Solution Preview

    ** Please see the attached file for the complete solution **

    1.) On January 1, 2004, Carly Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $30,000 at 9% each January 1 beginning in 2004. What will be the balance in the fund, within $10, on January 1, 2009 ( one year after the last deposit)? The following 9% Interest factors may be used.

    Present Value of Ordinary Annuity Future ...

    Solution Summary

    In this solution, we find what the balance of a fund is based on the present value of ordinary annuity.

    $2.19

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