Chapter A3, Problem 14E

Future Values and Long-Term Investments

Portman Corporation engaged in the following transactions during 2020:

a. On January 1, 2020, Portman deposited $12,000 in a certificate of deposit paying 6% interest compounded semiannually (3% per 6-month period). The certificate will mature on December 31, 2023

b. On January 1, 2020, Portman established an account with Lee County Bank. Portman will make quarterly payments of $2,500 to Lee beginning on March 31, 2020, and ending on December 31, 2021. Lee guarantees an interest rate of 8% compounded quarterly (2% per 3-month period).

Required:

1. Prepare the cash flow diagram for each of these two investments.

2. Calculate the amount to which each of these investments will accumulate at maturity. (Note: Round answers to two decimal places.)