A company plans to make four annual deposits of $200,000 each to a special building fund. The
Question:
A company plans to make four annual deposits of $200,000 each to a special building fund. The fund’s assets will be invested in mortgage instruments expected to pay interest at 12% on the fund’s balance. Determine how much will be accumulated in the fund after four years under each of the following situations:
1. The $200,000 annual deposits are made at the end of each of the four years and interest is compounded annually.
2. The $200,000 annual deposits are made at the beginning of each of the four years and interest is compounded annually.
3. The $200,000 annual deposits are made at the beginning of each of the four years and interest is compounded quarterly.
4. The $200,000 annual deposits are made at the beginning of each of the four years interest is compounded annually, and interest earned is withdrawn at the end of each year.
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