Question

14. Ms. Smith has two grandchildren. Adam and Evelyn. Adam will be enrolling in college on September 1, 2003, and Evelyn will be enrolling in college on September 1, 2005. Ms. Smith wishes to give both Adam and Evelyn $1,000 at the beginning of each of their four years of college. Ms. Smith will fund these payments by making five level annual deposits of P into an account earning at annual effective interest rate of 7%, with the first deposit on September 1, 1998. Determine the value of P. Answer: P = 1103.46

Answer 1

Solutions the given question, Ms smith has grandchildren, Adam and Evelyn . She wishes to give both adam and Evelyn $ 1ooo at the beginning their of each of the four years of college : It means total amount needed - 88000 Ms Smith will find these Payments by making five level annual deposit of p. Annual effective interest rate - 70% Time = year. Assume September Ist is the beggining of the year formula foln & A(148) 1 (1+2) forn a 82 и . future value Annuity (P) Rate Time Period i 38000 A (14 0:07) $_(10.07) $ 8000. Al 1.4025-V ) (1.07) 0.07 0.07 / Scanned with CamScanner

3) $ 8000 Al S75) (1.07) 31 $ 8000 , A ( 6:1505) 8 soor 6.1525 ? $ 1300:28 Amount every 1st 2002 & sooo $1300 .28 year from in the at last . is deposited by Ms. smith September 1st, 1988 to September. begginning to received Scanned with CamScanner