Question

Problem 4 and 5-5 Present Value and Annuity Payments A local furniture store is advertising a deal in which you buy a $3,100 dining room set and do not need to pay for two years (no interest cost is incurred) How much money would you have to deposit now in a savings account earning 4 percent APR, compounded monthly, to pay the $3,100 bill in two years? (Do not round intermediate calculations and round your final answer to 2 declmal places.) Present value How much would you have to deposit in the savings account each month to be able to pay the bill? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Annuity payment per month

Answer 1

1.
=Future Value/(1+r/m)^(m*t)
=3100/(1+4%/12)^(2*12)
=2862.04141

2.
=Future Value*(r/m)/((1+r/m)^(m*t)-1)
=3100*(4%/12)/((1+4%/12)^(2*12)-1)
=124.28393