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Future Value/Present Value and Annuity Tables

1. John started a paper route 1/1/95. Every three months, he deposit $500.00 in his bank account. The account earns 4% annually but is compounded quarterly. On 12/31/98, he used the entire balance in his account to invest in a contract that pays 9% annually. How much will he have on 12/31/01?

2. Joe invests $50,000 in a project that is expected to yield a return of 8% compounded semi-annually over the next 5 years. He will then take the proceeds & provide himself with a 10 year annuity. Assuming a 10% annual interest rate, how much will the annuity be?

3. Sue will receive 12,000 a year for the next 15 years as a result of her patent. Using a 9% rate, should she be will to sell her future rights now for $100,000.

4.If you owe $40,000 payable at the end of seven years. How much should your creditors be willing to accept if they could earn 12%.

Solution Preview

1. John started a paper route 1/1/95. Every three months, he deposit $500.00 in his bank account. The account earns 4% annually but is compounded quarterly. On 12/31/98, he used the entire balance in his account to invest in a contract that pays 9% annually. How much will he have on 12/31/01?

First, we compute the future value of the annuity(although quarterly)
Payment = 500
Interest rate = 4%/ 4= 1%
Number of ...

Solution Summary

Future Value/Present Value and Annuity Tables are investigated.

$2.19