Determine the amount of money in a savings account at the end of one years, given an initial deposit of $9,500 and an 12 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly.

Future valuea.Annually$b.Semiannually$c.Quarterly$

Calculate the effective annual interest rate of each compounding possibility.

Effective annual interest ratea.Annually%b.Semiannually%c.Quarterly%

(2) Carrie Tune will receive $18,500 a year for the next 18 years as payment for a song she has just written. If a present 12 percent discount rate is applied:

a-1.Calculate the present value.

Present value$

a-2.Should she be willing to sell out her future rights now for $162,000?

• Yes
• No

b-1.Calculate the present value if the payments will be made at the beginning of each year.

Present value$

b-2.Would she be willing to sell her future rights now for $162,0000, if the payments will be made at the beginning of each year?

multiple choice 2

• No
• Yes

(3) S. Ken Flint retired as president of Colour Tile Company, but he is currently on a consulting contract for $63,000 per year for the next 10 years.

a.If Mr. Flint's opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?

Present value$

b.Assuming Mr. Flint will not retire for two more years and will not start to receive his ten payments until the end of the third year, what would be the value of his deferred annuity?

Present value$

c.Recalculate partaassuming the contract stipulates that payments are to be made at the beginning of each year.

Present value$

Answer rating: 100% (QA)

Question 1 To calculate the future value of the savings account we can use the formula Future Value Principal 1 Interest RateNumber of Compounding PeriodsNumber of Compounding Periods Number of Years ... View the full answer