Problem 5-36 Annuity Interest Rate (LG5-8) What annual interest rate would you need to earn if you wanted a $600 per...

Question

Question

Problem 5-36 Annuity Interest Rate (LG5-8) What annual interest rate would you need to earn if you wanted a $600 per month co

Answer 1

Answer #1

We can use Future Value of Annuity (FVA) formula:

|(1 + i) - 1 FVA = A

52,500 = 600 (1 + i)6-12 - 1

87.5 = ! (1 + i)72 - 1

When you solve it you get i = 0.064 or 6.4%

Refer the following table for verification.

note: For one month Interest = (6.4%/12)

Year Month Interest Opening opening * 6.4% contribution Balance 600 1203 3.200 6.417 1810 9.651 2419 3032 3648 4268 4891 600

Year Balance 600 000 au 600 600/ Interest Month Opening Opening 6.4% contribution 15318.73 81.700 16000.43 85.336 16685.77 88

Year 3 Interest Month Opening contribution Balance Opening * 6.4% 1 32723.36 174.525 600 33498 33497.88 178.655 34277 34276.5

Answer 2

Similar Homework Help Questions

What annual interest rate would you need to earn if you wanted a $1,000 per month...

What annual interest rate would you need to earn if you wanted a $1,000 per month contribution to grow to $84,500 in six years?
Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 8-year, annual $3,500 annuity...

Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 8-year, annual $3,500 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.) 010 Annuity interest rateſ
Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 10-year, annual $3,100 annuity...

Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 10-year, annual $3,100 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.) Annuity interest rate %

Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 9-year, annual $3,300 annuity...

Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 9-year, annual $3,300 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.) Annuity interest rate %
Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 10-year, annual $3,200 annuity...

Problem 5-34 Annuity Interest Rate (LG5-8) What's the interest rate of a 10-year, annual $3,200 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.) Annuity interest rate
helpProblem 5-1 Future Value (LG5-1) 25 Compute the future value in year 7 of a...

Problem 5-1 Future Value (LG5-1) Compute the future value in year 7 of a $2,200 deposit in year 1, and another $1700 deposit at the end of year 4 using a 8 percent interest rate (Do not round intermediate calculations and round your final answer to 2 decimal places.) Problem 4 and 5-6 Present Value and Annuity Payments A local furniture store is advertising a deal in which you buy a $4,200 living room set with three years before you need to make...

Problem 5-20 Future Value of Multiple Annuities (LG5-2) Assume that you contribute $240 per month to...

Problem 5-20 Future Value of Multiple Annuities (LG5-2) Assume that you contribute $240 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $440 per month for the next 25 years. Given a 9.0 percent interest rate, what is the value of your retirement plan after the 40 years? (Do not round Intermediate calculations and round your final answer to 2 decimal places.) Future value of multiple annuities
Problem 5-38 Annuity Interest Rate (LG5-8) To borrow $1,300, you are offered an add-on interest loan...

Problem 5-38 Annuity Interest Rate (LG5-8) To borrow $1,300, you are offered an add-on interest loan at 6 percent. Three another at eight months, and the last one at the end of the year. Compute the three equal payments. (Round your answer to 2 decimal places.) Three equal payments
Problem 4-35 Solving for Rates (LG4-7) 25 You invested $2,000 in the stock market one year...

Problem 4-35 Solving for Rates (LG4-7) 25 You invested $2,000 in the stock market one year ago. Today, the investment is valued at $1700 points What return did you earn? (Negative answer should be indicated by a minus sign) Bock Retur eamed Berences What return would you need to get next year to break even overall? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Retum eamed LMR my Problem 4-32 Solving for Time (LG4-8) 2.5 points...

Problem 5-38 Annuity Interest Rate (LG5-8) To borrow $1,300, you are offered an add-on interest loan...

Problem 5-38 Annuity Interest Rate (LG5-8) To borrow $1,300, you are offered an add-on interest loan at 6 percent. Three loan payments are to be made, one at four months another at eight months, and the last one at the end of the year. Compute the three equal payments. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Three equal $ 450.78 payments