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Use the appropriate formula located on Illustration 10-1 on page 209 to solve the problem. Bob deposits $5000 at the end of each 6 months for 14 years in an account paying 6% interest compounded semiannually A) Find the amount he will have on deposit at maturity. B) How much interest did Bob earn? Hint: Find the total amount that was deposited by multiplying the total number deposits with amount of each deposit and then subtracting this from the future value. Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with information and provide th answers. Be sure to parts using the provided letters and organize your work neatly.

Use the appropriate formula located on Illustration 10-1 on page 209 to solve the problem. Bob deposits $5000 at the end of each 6 months for 14 years in an account paying 6% interest compounded semiannually A) Find the amount he will have on deposit at maturity. B) How much interest did Bob earn? Hint: Find the total amount that was deposited by multiplying the total number deposits with amount of each deposit and then subtracting this from the future value. Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with information and provide th answers. Be sure to parts using the provided letters and organize your work neatly.

Essentials Of Investments
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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llustration 10-1 Compound Interest Formulas Formula If periodic payment is made at the beginning of each period When to use Need to know FV; know PV FV = PV(1 + i) IA Not applicable. PV Need to know FV; know PMT Multiply the result by (1 + i). (1 + i) - FV = PMT IB PMT PMT PMT PMT РМТ РМТ РМТ РМТ Need to know PV; know FV PV =FV 2A Not applicable. (1 + i) FV Multiply the result by (1 + i). PMT PMT PMT PMT Need to know PV; know PMT PMT PMT PMT PMT 2B PV = PMT (1 + i)" ? Need to know interest rate; know PV and FV FV - 1 i = ? Not applicable. i = FV PV Divide the result by (1 + i). Need to know PMT; know FV FV(i) 4A PMT = FV (1 + i)" - 1 FV Divide the result by (1 + i). Need to know PMT; know PV PV(i) 4B PMT PV 1- (1 + i)" PV Need to know n; know at least two of these variables: PV, FV, PMT PV + (1 + i) (PMT) - In (PMI) (1 + i) (PMT) - FV PV + - In PMT -FV 5* n= ? n = In(1 + i) n = In(1 + i) esent value; FV = future value: PMT = periodic payment; i = interest rate per period, expressed in decimal form; n = total number of periods. The ymbol In stands for natural logarithm. Dona S is a comprehensive formula that covers quite a few situations. For this formula, use proper sign convention for PV, FV, and PMT. Think of the PV
Transcribed Image Text:llustration 10-1 Compound Interest Formulas Formula If periodic payment is made at the beginning of each period When to use Need to know FV; know PV FV = PV(1 + i) IA Not applicable. PV Need to know FV; know PMT Multiply the result by (1 + i). (1 + i) - FV = PMT IB PMT PMT PMT PMT РМТ РМТ РМТ РМТ Need to know PV; know FV PV =FV 2A Not applicable. (1 + i) FV Multiply the result by (1 + i). PMT PMT PMT PMT Need to know PV; know PMT PMT PMT PMT PMT 2B PV = PMT (1 + i)" ? Need to know interest rate; know PV and FV FV - 1 i = ? Not applicable. i = FV PV Divide the result by (1 + i). Need to know PMT; know FV FV(i) 4A PMT = FV (1 + i)" - 1 FV Divide the result by (1 + i). Need to know PMT; know PV PV(i) 4B PMT PV 1- (1 + i)" PV Need to know n; know at least two of these variables: PV, FV, PMT PV + (1 + i) (PMT) - In (PMI) (1 + i) (PMT) - FV PV + - In PMT -FV 5* n= ? n = In(1 + i) n = In(1 + i) esent value; FV = future value: PMT = periodic payment; i = interest rate per period, expressed in decimal form; n = total number of periods. The ymbol In stands for natural logarithm. Dona S is a comprehensive formula that covers quite a few situations. For this formula, use proper sign convention for PV, FV, and PMT. Think of the PV
Use the appropriate formula located on Illustration 10-1 on page 209 to solve the problem. Bob deposits $5000 at the end of each 6 months for 14 years in an account paying 6% interest compounded semiannually A) Find the amount he will have on deposit at maturity. B) How much interest did Bob earn? Hint: Find the total amount that was deposited by multiplying the total number deposits with amount of each deposit and then subtracting this from the future value. Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with information and provide the answers. Be sure to parts using the provided letters and organize your work neatly.
Transcribed Image Text:Use the appropriate formula located on Illustration 10-1 on page 209 to solve the problem. Bob deposits $5000 at the end of each 6 months for 14 years in an account paying 6% interest compounded semiannually A) Find the amount he will have on deposit at maturity. B) How much interest did Bob earn? Hint: Find the total amount that was deposited by multiplying the total number deposits with amount of each deposit and then subtracting this from the future value. Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with information and provide the answers. Be sure to parts using the provided letters and organize your work neatly.
Expert Solution
Step 1

Given:

Semi-annual contribution : $5,000

Annual Interest Rate: 6%

Compounding: Semi-Annual

Number of years over which the contributions are made: 14

Required:

  1. The Future Value of the annuity
  2. The total interest earned on the deposit. 
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