FUTURE VALUES AND LONG-TERM INVESTMENTS Pueblo Pottery, Inc., engaged in the following transactions during 2009:

a. On January 1, 2009, Pueblo 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, 2012.

b. On January 1, 2009, Pueblo established an account with Durango Investment Management. Pueblo will make quarterly payments of $2,500 to Durango beginning on March 31, 2009, and ending on December 31, 2010. Durango guarantees an interest rate of 8 percent compounded quarterly (2 percent per three-month period).

Required:

. Prepare the cash flow diagram for each of these two investments.

. Calculate the amount to which each of these investments will accumulate at maturity.

Exercise