The following are several situations involving compound interest. Required: Using the appropriate table, solve each of the following: Hope Dearborn invests $40,000 on January 1, Year 1, in a savings account that earns interest of 8% compounded semiannually. What will be the amount in the fund on December 31, Year 6? Ben Johnson receives a bonus of $5,000 each year on December 31. Beginning on December 31, Year 1, he deposits his bonus every year in a savings account that earns interest of 12% compounded annually. What will be the amount in the fund on December 31, Year 5, after he deposits his bonus received on that date? Ron Sewert owes $30,000 on a non-interest-bearing note due January 1, Year 11. He offers to pay the amount on January 1, Year 1, provided that it is discounted at 10% on a compound annual discount basis. What would he have to pay on January 1, Year 1, under this assumption? June Stickney purchased an annuity on January 1, Year 1, which, at a 12% annual rate, would yield $6,000 each June 30 and December 31 for the next 6 years. What was the cost of the annuity to Stickney? Five equal annual contributions are to be made to a fund, with the first deposit on December 31, Year 1. Determine the equal contributions that, if invested at 10% compounded annually, will produce a fund of $30,000 on December 31, Year 6. Beginning on December 31, Year 2, 6 equal annual withdrawals are to be made. Determine the equal annual withdrawals if $11,000 is invested at 10% interest compounded annually on December 31, Year 1
The following are several situations involving compound interest.
Required:
Using the appropriate table, solve each of the following:
Hope Dearborn invests $40,000 on January 1, Year 1, in a savings account that earns interest of 8% compounded semiannually. What will be the amount in the fund on December 31, Year 6?
Ben Johnson receives a bonus of $5,000 each year on December 31. Beginning on December 31, Year 1, he deposits his bonus every year in a savings account that earns interest of 12% compounded annually. What will be the amount in the fund on December 31, Year 5, after he deposits his bonus received on that date?
Ron Sewert owes $30,000 on a non-interest-bearing note due January 1, Year 11. He offers to pay the amount on January 1, Year 1, provided that it is discounted at 10% on a compound annual discount basis. What would he have to pay on January 1, Year 1, under this assumption?
June Stickney purchased an annuity on January 1, Year 1, which, at a 12% annual rate, would yield $6,000 each June 30 and December 31 for the next 6 years. What was the cost of the annuity to Stickney?
Five equal annual contributions are to be made to a fund, with the first deposit on December 31, Year 1. Determine the equal contributions that, if invested at 10% compounded annually, will produce a fund of $30,000 on December 31, Year 6.
Beginning on December 31, Year 2, 6 equal annual withdrawals are to be made. Determine the equal annual withdrawals if $11,000 is invested at 10% interest compounded annually on December 31, Year 1
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