Fired Up Pottery, Inc., engaged in the following transactions during 2012:
a. On January 1, 2012, Fired Up deposited $ 12,000 in a certificate of deposit paying 6 percent interest compounded semiannually (3 percent per six-month period). The certificate will mature on December 31, 2015.
b. On January 1, 2012, Fired Up established an account with Rookwood Investment Management. Fired Up will make quarterly payments of $ 2,500 to Rookwood beginning on March 31, 2012, and ending on December 31, 2013. Rookwood guarantees an interest rate of 8 percent compounded quarterly (2 percent per three- month period).
Required:
1. Prepare the cash flow diagram for each of these two investments.
2. Calculate the amount to which each of these investments will accumulate at maturity.