Question

37. Mathewr desires $360,000 in 16 years. He has a choice of several different investments, all of which earn 13%. Each inves
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Answer #1

a.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

360,000=P*(1.13)^16

P=360,000/(1.13)^16

=360,000*0.141496242

=$50938.65(Approx)

b.We use the formula:
A=P(1+r/2)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.

360,000=P*(1+0.13/2)^(2*16)

P=360,000/(1+0.13/2)^(2*16)

=360,000*0.133294599

=$47986.06(Approx).

c.We use the formula:
A=P(1+r/4)^4n
where
A=future value
P=present value
r=rate of interest
n=time period.

360,000=P*(1+0.13/4)^(4*16)

P=360,000/(1+0.13/4)^(4*16)

=360,000*0.129132672

=$46487.76(Approx)

d.We use the formula:
A=P(1+r/12)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

360,000=P*(1+0.13/12)^(12*16)

P=360,000/(1+0.13/12)^(12*16)

=360,000*0.126335521

=$45480.79(Approx)

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