Explanation Given: The time period is twenty five years. The amount is $ 1 , 400 The annual COLA rate is 5 % . The annual interest rate is 8.9 % . Approach: The future value of ordinary annuity is given as, FV ( ordinary ) = P y ( 1 + i ) n − 1 i Here, FV is the future value, P y is the payment, i is the compound interest and n is the number of periods. Calculation: Calculate the rate of interest monthly. i = 8.9 % 12 = 1 12 ( 8.9 100 ) = 0.00741667 Calculate the number of periods for future value. n = 1 × 12 months = 12 months Write the expression to calculate the future value of ordinary annuity To determine (b) To find: The annual yield. To determine (c) To find: The money to be deposited. To determine (d) The monthly payment.

8th Edition

ISBN: 9781305104174

Author: David B. Johnson, Thomas A. Mowry

Publisher: Cengage Learning

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Chapter 5.6, Problem 15E

To determine

(a)

To find:

The future value.

To determine

(b)

To find:

The annual yield.

To determine

(c)

To find:

The money to be deposited.

To determine

(d)

The monthly payment.

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Chapter 5.6, Problem 14E

Chapter 5.6, Problem 16E

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