Assume that 4 years from now you will need $1,000. Your bank compounds interest at an 8%
Question:
a. How much must you deposit 1 year from now to have a balance of $1,000 4 years from now?
b. If you want to make equal payments at Years 1 through 4 to accumulate the $1,000, how much each of the 4 payments be?
c. If your father were to offer either to make the payments calculated in part b or to give you a lump sum of $750 1 year from now, which would you choose?
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Let the four year considered be 2003200420052006 Now year 2002 a Future ...View the full answer
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