You have just purchased a pre-owned house. The inspector notified you that since the roof on...

Transcribed Image Text:

You have just purchased a pre-owned house. The inspector notified you that since the roof on the house is 12 years old, it would need to be replaced 8 years from now. In order to plan for the major expense of replacing the roof, you decided to set up a savings account in which you plan to make annual deposits as shown in Table 1. If the account can earn an effective annual interest rate of 2% a. Draw a fully labeled cash flow diagram of your deposits into the account from your point of you (10 points) b. Setup the equations to calculate the savings account balance at the EOY 8 (14 points) c. Calculate the savings account balance at EOY 8 (1 points) EOY 0 1 2 3 4 5 6 7 8 Table 1 Deposit $500 $500 $500 $500 $500 $500 $1,000 $1,000 $1,000 You have just purchased a pre-owned house. The inspector notified you that since the roof on the house is 12 years old, it would need to be replaced 8 years from now. In order to plan for the major expense of replacing the roof, you decided to set up a savings account in which you plan to make annual deposits as shown in Table 1. If the account can earn an effective annual interest rate of 2% a. Draw a fully labeled cash flow diagram of your deposits into the account from your point of you (10 points) b. Setup the equations to calculate the savings account balance at the EOY 8 (14 points) c. Calculate the savings account balance at EOY 8 (1 points) EOY 0 1 2 3 4 5 6 7 8 Table 1 Deposit $500 $500 $500 $500 $500 $500 $1,000 $1,000 $1,000

Answer rating: 100% (QA)

Here is my solution with calculations shown in detail a Cash flow diagram Year 0 Opening balance 0 Y... View the full answer