Recent sales of some real estate and record profits make it possible for a manufacturer to set aside $900,000 in a fund to be used for modernization and remodeling. How much can be withdrawn from this fund at the beginning of each half-year for the next 6 years if the fund earns 7.1%, compounded semiannually? (a) Decide whether the problem relates to an ordinary annuity or an annuity due. O ordinary annuity O annuity due (b) Solve the problem. (Round your answer to the nearest cent.)

Recent sales of some real estate and record profits make it possible for a manufacturer to set aside $900,000 in a fund to be used for modernization and remodeling. How much can be withdrawn from this fund at the beginning of each half-year for the next 6 years if the fund earns 7.1%, compounded semiannually? (a) Decide whether the problem relates to an ordinary annuity or an annuity due. O ordinary annuity O annuity due (b) Solve the problem. (Round your answer 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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A corporation creates a sinking fund in order to have $910,000 to replace some machinery in 8 years. How much should be placed in this account at the end of each month if the annual interest rate is 6.8% compounded monthly? (Round your answers to the nearest cent.) $ How much interest would they earn over the life of the account? $ Determine the value of the fund after 2, 4, and 6 years. 2 years S 4 years S 6 years S How much interest was earned during the second month of the 6th year? S
A fund is built with annual payments increasing by $1 from $1 to $10 and then decreasing by $1 to $0. The first payment of $1 is made today. If the fund is used to purchase a ten-year level annuity with the first payment at twenty years from today, what is the amount of the level payment? (Assume an annual effective rate of interest of 4%.) Possible Answers A B D <$16 c≥ $17 but < $18 E ≥ $16 but < $17 ≥ $18 but < $19 ≥ $19
A student will receive a $25,000 grant at the beginning of every year for the next five years. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.4518 x $25,000 = $111,295, and the present value of an annuity due is 4.6299 x $25,000 = $115,748. What is the fair value of the grant payments according to the Financial Accounting Standards Board (FASB)? $130,000 $115,748 $125,000 $111,295
Computing the Future Value of an Annuity Stone will deposit $8,250 at the beginning of each year for 10 years in a fund that earns 5%, compounded annually. What is the total amount of the fund at the end of 10 years? Round your answer to the nearest whole number. Do not use a negative sign with your answer. $ Answer
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Find the periodic payment for each sinking fund that is needed to accumulate the given sum under the given conditions. (Round your answer to the nearest cent.) FV = $1,500,000, r = 4.7%, compounded semiannually for 25 years
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Al Darby wants to withdraw $21400 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 12% compounded annually? $21400 times the present value of a 5-year, 12% ordinary annuity of 1. $21400 times the future value of a 5-year, 12% ordinary annuity of 1. $21400 divided by the present value of a 5-year, 12% ordinary annuity of 1. $21400 divided by the future value of a 5-year, 12% ordinary annuity of 1.

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