Question

You need $25,656 at the end of 7 years, and your only investment autlet is an 12 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning ar the first year, se Appendix B and Appendix С for an approximate answer, but calculate your final answer using the formula and financal calculator methods. a. What single payment could be made at the beginning of the first year to achieve this objective? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Single payment made b. What amount could you pay at the end of each year annually for 7 years to achieve this same objective? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Amount to be paid

Answer 1

a)we know that

Future value=present value×FvF(7y,12%)

$25656=present value×2.2107

=Present value=$25656/2.2107

=11605.4

b)incase of annuity payments

Future value/Fvaf(7y,12%)=present value

Therefore prent value=$25656/10.1796

=$2520.334