Connect 1 Semester Access Card for Fundamentals of Financial Accounting
5th Edition
ISBN: 9781259128547
Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby
Publisher: McGraw-Hill Education
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Question
Chapter AC, Problem AC.8ME
To determine
To compute: The future value of an annuity.
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Use the present value and future value tables to answer the following questions.
A. If you would like to accumulate $2,500 over the next 3 years when the interest rate is 15%, how much do you need to deposit in the account?
$fill in the blank 1
B. If you place $6,300 in a savings account, how much will you have at the end of 8 years with a 12% interest rate?
$fill in the blank 2
C. You invest $9,000 per year for 9 years at 12% interest, how much will you have at the end of 9 years?
$fill in the blank 3
D. You win the lottery and can either receive $740,000 as a lump sum or $60,000 per year for 19 years. Assuming you can earn 8% interest, which do you recommend and why?
Please round off answers
Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here 9 in order to copy the contents of the data table below into a spreadsheet.)
Amount of annuity
Interest rate
Deposit period (years)
$6,000
8%
10
a. Calculate the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable as an investment? Explain why.
.....
a. (1) The future value of the ordinary annuity is $
(Round to the nearest cent.)
(2) The future value of the annuity due is $
(Round to the nearest cent.)
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity is preferable as an investment? (Select the best answer below.)
Ordinary annuity, because it yields a greater future value.
Annuity due, because it yields a greater future value.
Chapter AC Solutions
Connect 1 Semester Access Card for Fundamentals of Financial Accounting
Ch. AC - Prob. 1QCh. AC - Prob. 2QCh. AC - Which of the following is most likely to be an...Ch. AC - Prob. 4QCh. AC - Prob. 5QCh. AC - Prob. 6QCh. AC - Prob. 7QCh. AC - You are saving up for a Mercedes-Benz SLR McLaren,...Ch. AC - Prob. 2MCCh. AC - Prob. 3MC
Ch. AC - Prob. 4MCCh. AC - Prob. 5MCCh. AC - Assume you bought a car using a loan that requires...Ch. AC - Assume you bought a car using a loan that requires...Ch. AC - Which of the following statements is true? a. When...Ch. AC - Prob. 9MCCh. AC - Prob. 10MCCh. AC - Prob. AC.1MECh. AC - Prob. AC.2MECh. AC - Prob. AC.3MECh. AC - Prob. AC.4MECh. AC - Prob. AC.5MECh. AC - Prob. AC.6MECh. AC - Prob. AC.7MECh. AC - Prob. AC.8MECh. AC - Prob. AC.9MECh. AC - Prob. AC.10MECh. AC - Prob. AC.11MECh. AC - Prob. AC.12MECh. AC - Prob. AC.1ECh. AC - Prob. AC.2ECh. AC - Prob. AC.3ECh. AC - Prob. AC.4ECh. AC - Prob. AC.5ECh. AC - Computing Bond Issue Proceeds and Issue Price Your...Ch. AC - Computing Missing Present or Future Values...Ch. AC - Comparing Options Using Present Value Concepts...Ch. AC - Prob. AC.2CPCh. AC - Prob. AC.3CPCh. AC - Prob. AC.4CPCh. AC - Prob. AC.1PACh. AC - Recording Equipment Purchase with Two-Year Note...Ch. AC - Prob. AC.3PACh. AC - Prob. AC.4PACh. AC - Prob. AC.1PBCh. AC - Recording Equipment Purchase with Two-Year Note...Ch. AC - Prob. AC.3PBCh. AC - Prob. AC.4PB
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