(Comprehensive problem) You would like to have $79,000 in 16 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 7 percent interest compounded annually. Your first payment will be made at the end of the year. How much must you deposit annually to accumulate this amount? a. b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should the lump-sum deposit be? (Assume you can earn 7 percent on this deposit.) c. At the end of year 5, you will receive $15,000 and deposit it in the bank in an effort to reach your goal of $79,000 at the end of year 16. In addition to the lump-sum deposit, how much must you invest in 18 equal annual deposits to reach your goal? (Again, assume you can earn 7 percent on this deposit.) (Annuity payments) You plan to buy property in Florida 8 years from today. To do this, you estimate that you will need $35,000 at that time for the purchase. You would like to accumulate these funds by making equal annual deposits into your savings account, which pays 13 percent annually. If you make your first deposit at the end of this year, and you would like your account to reach $35,000 when the final deposit is made, what amount do you need to deposit annually? The amount you need to deposit annually is $. (Round to the nearest cent.)
(Comprehensive problem) You would like to have $79,000 in 16 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 7 percent interest compounded annually. Your first payment will be made at the end of the year. How much must you deposit annually to accumulate this amount? a. b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should the lump-sum deposit be? (Assume you can earn 7 percent on this deposit.) c. At the end of year 5, you will receive $15,000 and deposit it in the bank in an effort to reach your goal of $79,000 at the end of year 16. In addition to the lump-sum deposit, how much must you invest in 18 equal annual deposits to reach your goal? (Again, assume you can earn 7 percent on this deposit.) (Annuity payments) You plan to buy property in Florida 8 years from today. To do this, you estimate that you will need $35,000 at that time for the purchase. You would like to accumulate these funds by making equal annual deposits into your savings account, which pays 13 percent annually. If you make your first deposit at the end of this year, and you would like your account to reach $35,000 when the final deposit is made, what amount do you need to deposit annually? The amount you need to deposit annually is $. (Round to the nearest cent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:(Comprehensive problem) You would like to have $79,000 in 16 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 7 percent interest compounded annually. Your first payment will be made at the end of the year.
How much must you deposit annually to accumulate this amount?
a.
b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should the lump-sum deposit be? (Assume you can earn 7 percent on this deposit.)
c. At the end of year 5, you will receive $15,000 and deposit it in the bank in an effort to reach your goal of $79,000 at the end of year 16. In addition to the lump-sum deposit, how much must you invest in 18 equal annual deposits to reach your goal? (Again, assume you can earn 7 percent on
this deposit.)
Transcribed Image Text:(Annuity payments) You plan to buy property in Florida 8 years from today. To do this, you estimate that you will need $35,000 at that time for the purchase. You would like to accumulate these funds by making equal annual deposits into your savings account, which pays 13 percent annually. If
you make your first deposit at the end of this year, and you would like your account to reach $35,000 when the final deposit is made, what amount do you need to deposit annually?
The amount you need to deposit annually is $. (Round to the nearest cent.)
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