(From section 6.1) SouthWestern airlines sets up a sinking fund so that they will have $75,500 to pay for a replacement piece of equipment in 15 years when the current equipment will be sold for scrap. If they make deposits into the account at the beginning of every 3 months for 15 years, and the investment account pays 4.4% interest compounded every 3 months, what will the quarterly deposit be to reach their goal? (a) Which formula will you use? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = r = A or Po = (c) Write the formula you will use with the numbers plugged in below.
(From section 6.1) SouthWestern airlines sets up a sinking fund so that they will have $75,500 to pay for a replacement piece of equipment in 15 years when the current equipment will be sold for scrap. If they make deposits into the account at the beginning of every 3 months for 15 years, and the investment account pays 4.4% interest compounded every 3 months, what will the quarterly deposit be to reach their goal? (a) Which formula will you use? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = r = A or Po = (c) Write the formula you will use with the numbers plugged in below.
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:1. (From section 6.1) SouthWestern airlines sets up a sinking fund so that they will have $75,500 to
pay for a replacement piece of equipment in 15 years when the current equipment will be sold for
scrap. If they make deposits into the account at the beginning of every 3 months for 15 years, and
the investment account pays 4.4% interest compounded every 3 months, what will the quarterly
deposit be to reach their goal?
(a) Which formula will you use? Circle one.
Annuity
Payout-Annuity
(b) What are the following variables that we will need for the formula?
PMT =
n =
t =
A or Po =
r =
(c) Write the formula you will use with the numbers plugged in below.
(d) Solve using your calculator or technology and round to two decimal places. Work is not
required here. Write the answer here and state which variable you solved for.
(e) Using your own words, describe what you found by solving the equation in terms of the word
problem given.
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