Question

Andrew and Emma Garfield invested $6,600 in a savings account paying 6% annual interest when their daughter, Angela, was born. They also deposited $1,000 on each of her birthdays until she was 18 (including her 18th birthday).

Sandhill Co. issued $900,000, 9-year bonds and agreed to make annual sinking fund deposits of $76,800. The deposits are made at the end of each year into an account paying 8% annual interest.

Answer 1

Answer:

1

In this question we have to apply future value of lumsum concept and future value of annuity concept at a time.

= 6,600 ( 1.06)18 = Future value of lumpsum =6,600 * 2.854339 = 18,838.64

And 1000 ( ( 1.06)18 - 1 ) / 0.06 = 1000 * 30.90565 = 30,905.65

Total of her saving account on 18th birthday = 18,838.64 + 30,905.65 = 49,744.29

2

Present value=$76800*Present value of annuity factor(8%,9)

=$76,800*6.24689

=$479,761.15

Hence e use the formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

Hence A=479,761.15(1+8/100)^9

=$953,048(approx).