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1. Compute the Future Value of a 20-year annuity that pays $15,000 per year. Assume an interest rate of 10.00 percent. Puck c
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Answer #1
1) FVA = 15000*(1.1^20-1)/(0.1*1.1^20) = $ 1,27,703.46
2) FV of the amount of 10000 in hand = 10000*(1+0.04/12)^60 = $     12,209.97
Balance to be accumulated to reach $15000 = 15000-12209.97 = $       2,790.03
The amount of $2790.03 is the FV of the monthly payments to be
made. Using the formula for finding FV of annuity,
the monthly installments to be paid = 2790.03*(0.04/12)*(1+0.04/12)^60/((1+0.04/12)^60-1)) = $             51.38
3) The weekly interest = 0.035/52
Equating the required values,
PV*3=PV*(1+0.035/52)^n, where n = number of weeks.
Solving for n
3 = (1+0.035/52)^n
Taking log of both sides
log3 = n*log1.0006730
n = log3/log1.0006730
n = 0.47712125472/0.00029218187814 = 1632.96 weeks
= 1632.96/52 = 31.40 years
Number of years for the deposit to triple in value = 31.40 years
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