3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Textbook Question

Chapter 7, Problem 7.10P

Future Value of an Ordinary Annuity, Deferred Annuity. Carfly barbers wants to have $200,000 in 10 years to build a second barbershop 10 years from today. Commencing two years from today, Carfly will make eight annual deposits of $18,000 at the end of each year. Alternatively, the company can invest in a financial instrument earning 9% compounded annually.

Answer the following questions:

a. Will Carfly have sufficient funds to pay for the $200,000 barbershop at the end of the 10-year period if the deposits are made at the end of the year?
b. Will Carfly have sufficient funds to pay for the $200,000 barbershop at the end of the 10-year period if the deposits are made at the beginning of each year?

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Chapter 7, Problem 7.9P

Chapter 7, Problem 7.11P

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Solution Summary: The author explains that C will not have sufficient funds to pay for the 200,000 barbershop at the end of 10 year period if the payments will be made in the beginning of each year.

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