Future Value of Annuity. Kirk can take his $960 income tax refund and invest it in a 36-month certificate of deposit at 9%, compounded monthly, or he can use the money to purchase a home entertainment system and put $30 a month in a bank savings account that will pay him 9% annual interest. Which choice will give him more money at the end of three years?

Future Value of Annuity. Kirk can take his $960 income tax refund and invest it in a 36-month certificate of deposit at 9%, compounded monthly, or he can use the money to purchase a home entertainment system and put $30 a month in a bank savings account that will pay him 9% annual interest. Which choice will give him more money at the end of three years?

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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Question

Future Value of Annuity. Kirk can take his $960 income tax refund and invest it in a 36-month certificate of
deposit at 9%, compounded monthly, or he can use the money to purchase a home entertainment system and put
$30 a month in a bank savings account that will pay him 9% annual interest. Which choice will give him more
money at the end of three years?
After depositing his income tax refund, at the end of three years Kirk will have $
Round to the nearest cent.)
(Use your financial calculator.

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Find the future value of each using the future value of an ordinary annuity formula. Shelly deposits the $2,000 she got as a birthday gift from her grandmotherinto an account earning 3.6% interest compounded monthly. She decides to also deposit $200 at the end of each month into the same account. How much will be in the account in 10 years? Julian won the lottery! He deposits some of his winnings intoan account earning 2.75% interest compounded quarterly. He makes his deposit of $25,000 and also decides to start making deposits of $1,000 into the same account at the end of each quarter. How much will he have after 5 years?
3. Give your answers to parts (a) to (e) to the nearest dollar. On Jake's 16th birthday his parents gave him options of how he might receive his monthly allowance for the next two years. Option A $50 each month for two years. Option B $5 in the first month, $10 in the second month, $15 in the third month, increasing by $5 each month for two years. Option C Investing $1000 at a bank at the beginning of the first year, with an interest rate of 6% per annum, compounded monthly. Jake does not spend any of his allowance during the two year period.
Using a scientific calculator Mr and Mrs Gonzales set up a TDA to save for their retirement. They are having $100 deducted from Mrs. Gonzales's biweekly checks which will earn 8 1/8% interest. Find the future value of their ordinary annuity if it comes to term after they retire in 35.5 years.
6) A couple will need $50, 000 for a down payment on a home in eleven years. They plan to invest $8,000 up front and make a payment at the end of each month for the full eleven years. Assume the account earns 6.89% monthly. (a) How much will the initial deposit be worth in ten years? Round to two decimal places. (b) How much should the monthly payment be? Round to two decimal places.
The Wright family wants to save money to travel the world. They purchase an annuity with a yearly payment of s480 that earns 4% interest, compounded annually. Payments will be made at the end of each year. Find the total value of the annuity in 14 years. Do not round any intermediate computations, and round your final answer to the nearest cent. If necessary, refer to the list of financial formulas.
Find the monthly payment for each loan below. Remember to assume monthly compounding. 11. Sean and Sam purchase a house with a $20,000 down payment. The purchase price of the house was $475,000 and they financed the rest for 3.75% for 30 years. Their annual taxes will be $2856, and their annual insurance will be $1984. What will their monthly principal, interest, tax, and insurance (PITI) mortgage payment be?
Without using Excel and using the formula, Cheryl is setting up a payout annuity and wishes to receive $1200 per month for 20 years. A. How much does she have to deposit if her money earns 8% interest compounded monthly? B. Find the total amount Cheryl will receive from her payout annuity.
Dean Gooch is planning for his retirement, so he is setting up a payout annuity with his bank. He wishes to receive a payout of $1,700 per month for twenty five years. His money earns 7.3% interest compounded monthly. (Round your answers to the nearest cent.) (a) How large a monthly payment must Dean Gooch make if he saves for his payout annuity with an ordinary annuity, which he sets up thirty years before his retirement? (The two annuities pay the same interest rate.) (b) How large a monthly payment must he make if he set the ordinary annuity up twenty years before his retirement?
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