Question

(b) The future value of $900 saved each year for 10 years at 7 percent. (Round time value factor to 3 decimal places and final answer to 2 decimal places.) Future valueſ (c) The amount a person would have to deposit today (present value) at an interest rate of 8 percent to have $1,000 five years from now. (Round time value factor to 3 decimal places and final answer to 2 decimal places.) Present value (d) The amount a person would have to deposit today to be able to take out $700 a year for 5 years from an account earning 7 percent. (Round time value factor to 3 decimal places and final answer to 2 decimal places.) Present value

Answer 1

b.Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=900[(1.07)^10-1]/0.07

=900*13.816

=$12434.4

c.Present value=1000*Present value of discounting factor(rate%,time period)

=1000/1.08^5

=1000*0.681

=$681

d.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=700[1-(1.07)^-5]/0.07

=700*4.100

=$2870