Question

Jamie Lee needs to save a total of $5,000 in order to get started in her cupcake café venture. She is presently depo jear in a regular savings account Calculate the future value of these deposits. B. Assuming that she leaves her emergency fund of $1,000 untouched, how much will her emergency fund be worth? C. What if Jamie Lee had a relative that could give her money now that she could invest? What is the minimum amount sh need now to ensure that she had $5,000 when she wanted to open the cupcake cafe? D. As Jamie Lee is planning ahead for operating the cupcake cafe, she calculates that she will need $32,000 per year in s the value of five years of salary when the cupcake café opens? (Assume that she will take the salary as a one-time paymen Use the table below and Exhibit 1-A, Exhibit 1-8. Exhibit 1-C. and Exhibit 1-D to calculate the balances of the information prov Assume that the time period for each scenario is 5 years, and the interest rate is 3% A. Future Value of a Series of Deposits Current amount times Future value F uture value quals factor factor amount 1.260.00 B. Future Value of a Single Amount Regular deposit amount times Future value of annuity factor equals Future value amount C. Present Value of a Single Amount Future amount Present value quals Present value amount 0 Present Value of a series of Deposits Regular amount to Present value Present value of annuity factor quals

Answer 1

Solution:

1.

Future Value of an Annuity
Formula
PMT [ (1+i)^n - 1] / i
Pmt	1250
i	3.00%
n	5
1+i	1.0300
(1+i)^n	1.1593
(1+i)^n - 1	0.1593
[ (1+i)^n - 1] / i	5.3091 (FV annuity Factor)
Future Value	$6,636.42

2.

Future Value of a Single Payment
Formula
FVn	PVo (1+i)^n
FVn	$1.00	Future Value
Pvo	$1,000.00	Present Value
i	3.00%	Annual Compound interest rate
n	5	number of years
(1+i)	1.0300
(1+i)^n	1.159274	(FV Factor)
FVn	$1,159.27

3.

Present Value of a Single Payment
Formula
Pvo	FVn / (1+i)^n
FVn	$5,000.00	Future Value
Pvo		Present Value
i	3%	Annual Compund interest rate
n	5	number of years\
(1+i)	1.03
(1+i)^n	1.1593	PV Factor
Pvo	$4,313.04

4.

Present Value of an Annuity
Salary	36,000
Rate (i)	3%
Period (r)	5
Present Value = PMT[1-1/(1+i)^n]/i
1+i	1.0300
(1+i)^n	1.1593
1/(1+i)^n	0.8626
1-1/(1+i)^n	0.1374
[1-1/(1+i)^n / i]	4.5797 (PV Annuity Factor)
Present Value	$1,46,550.63