Lump-sum deposit
Not what you're looking for?
P3-11. As part of your personal budgeting process, you have determined that in each of the next five years you will have budget shortfalls. In other words, you will need the amounts shown in the following table at the end of the given year to balance your budget?that is, inflows equal out-flows. You expect to be able to earn 8 percent on your investments during the next five years and wish to fund the budget shortfalls over these years with a single initial deposit.
End of Year Budget Shortfall
1 $ 5,000
2 4,000
3 6,000
4 10,000
5 3,000
a. How large must the lump-sum deposit be today into an account paying 8 percent annual in-
terest to provide for full coverage of the anticipated budget shortfall?
b. What effect would an increase in your earnings rate have on the amount calculated in part
a? Explain.
Purchase this Solution
Solution Summary
This posting provides a detailed solution to the student's question.
Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.