An investor is considering depositing $20,000 in an account earning 5% compounded quarterly for the next...
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An investor is considering depositing $20,000 in an account earning 5% compounded quarterly for the next three years. Afterwards, he will take this amount and contribute $200 quarterly for the next four years at a rate of 4% compounded semi- annually. Finally, over the next two years, he will withdraw $1,000 annually at a rate of 3.5% compounded monthly. Determine the future value at the end of this time period Hint: Each of the payments occurs at the end of the respective period. The $20,000 payment occurs at the end of each of the first three years. The $200 payment occurs at the end of each quarter for the next four years. The $1,000 paynment is withdrawn from the account at the end of each of the last 2 years. Additional hint: Do not attempt this as a cash flow (CF Keys) problem as the interest rate changes over the various periods. Treat this as a series of annuities, the 2nd two of which also have a PV, which is the FV from the prior annuity. (10 marks) 5% APR Compoundedquarterly 4% APR compounded semi-armually 20,000 20,000 20,000 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 0 1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1. 2 4. 3. An investor is considering depositing $20,000 in an account earning 5% compounded quarterly for the next three years. Afterwards, he will take this amount and contribute $200 quarterly for the next four years at a rate of 4% compounded semi- annually. Finally, over the next two years, he will withdraw $1,000 annually at a rate of 3.5% compounded monthly. Determine the future value at the end of this time period Hint: Each of the payments occurs at the end of the respective period. The $20,000 payment occurs at the end of each of the first three years. The $200 payment occurs at the end of each quarter for the next four years. The $1,000 paynment is withdrawn from the account at the end of each of the last 2 years. Additional hint: Do not attempt this as a cash flow (CF Keys) problem as the interest rate changes over the various periods. Treat this as a series of annuities, the 2nd two of which also have a PV, which is the FV from the prior annuity. (10 marks) 5% APR Compoundedquarterly 4% APR compounded semi-armually 20,000 20,000 20,000 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 0 1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1. 2 4. 3.
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Answer rating: 100% (QA)
Step 1 Amount at the end of 3 years Effective interest rate IR 1 km ... View the full answer
Related Book For
Managerial Decision Modeling with Spreadsheets
ISBN: 978-0136115830
3rd edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
Posted Date:
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