Question

Round all answers to the 2 decimal place

a. Derek will deposit $1,907.00 per year for 18.00 years into an account that earns 11.00%, The first deposit is made next year. He has $15,588.00 in his account today. How much will be in the account 46.00 years from today?

b. Derek will deposit $1,880.00 per year for 15.00 years into an account that earns 13.00%. Assuming the first deposit is made 4.00 years from today, how much will be in the account 30.00 years from today?

c. What is the value today of receiving $2,416.00 per year forever? Assume the first payment is made next year and the discount rate is 15.00%.

Answer 1

a)

Function Arguments FV 18 Rate 11% Nper Pmt -1907 Pv -15588 Type o 1 1 1 1 1 = 0.11 = 18 = -1907 = -15588 = 0 = 198105.9517 Returns the future value of an investment based on periodic, constant payments and a constant interest rate. Type is a value representing the timing of payment: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $ 198,105.95 Help on this function D OK Cancel

Value in 18 years is $198,105.95

Value in 46 years is $3,680,789.03 (198105.95*(1+11%)^28)

b)

Function Arguments FV Rate 13% Nper 15 Pmt -1880 Pro Type o f 1 1 = 0.13 = 15 = -1880 = 75984.83315 Returns the future value of an investment based on periodic, constant payments and a constant interest rate. Type is a value representing the timing of payment: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $75,984.83 Help on this function D OK Cancel

Value in 18 years is $75,984.83

Value in 30 years is $329,358 (75984.83*(1+13%)^12)

c)

Present value=2416/15%

=$16,106.67

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