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Posted on Jul 29, 2024

4. The first deposit is made on December 31, 2015, interest is compounded annually, and interest earned is withdrawn at the end of each year.

4.	The first deposit is made on December 31, 2015, interest is compounded annually, andinterest earned is withdrawn at the end of each year.

Deposit Amount	No. of Payments	Interest left in Fund	Fund Balance 12/31/2019
$2,500	?	?	?

Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2016, of a five-period annual annuity of $2,600 under each of the following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

The first payment is received on December 31, 2017, and interest is compounded quarterly.

Using the PV of $1 chart, calculate the present value:
Deposit Date	i =	n =	Deposit	PV - 12/31/2016
12/31/2017	?	?	$2,600	?
12/31/2018	?	?	2,600	?
12/31/2019	?	?	2,600	?
12/31/2020	?	?	2,600	?
12/31/2021	?	?	2,600	?
				?

Answer each of the following independent questions.

Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $82,000 cash immediately, (2) $30,000 cash immediately and a six-period annuity of $9,000 beginning one year from today, or (3) a six-period annuity of $17,000 beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1-a. Assuming an intrest rate of 7% determine the PV value for the above options.

	Annuity Payment	PV Annuity		Immediate Cash		PV Option
Option 1	?	?	+	?	=	?
Option 2	?	?	+	?	=	?
Option 3	?	?	+	?	=

1-b.

Which option should Alex choose?

	Option (1)
	Option (2)
	Option (3)

The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2025. Weimer will make annual deposits of $160,000 into a special bank account at the end of each of 10 years beginning December 31, 2016. Assuming that the bank account pays 8% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2025?


Table or calculator function:	?
Payment:	?
n =	?
i =	?
Future value:

Listed below are several terms and phrases associated with concepts discussed in the chapter. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

List A		List B
1.	Interest	a.	First cash flow occurs one period after agreement begins.
2.	Monetary asset	b.	The rate at which money will actually grow during a year.
3.	Compound interest	c.	First cash flow occurs on the first day of the agreement.
4.	Simple interest	d.	The amount of money that a dollar will grow to.
5.	Annuity	e.	Amount of money paid/received in excess of amount borrowed/lent.
6.	Present value of a single amount	f.	Obligation to pay a sum of cash, the amount of which is fixed.
7.	Annuity due	g.	Money can be invested today and grow to a larger amount.
8.	Future value of a single amount	h.	No fixed dollar amount attached.
9.	Ordinary annuity	i.	Computed by multiplying an invested amount by the interest rate.
10.	Effective rate or yield	j.	Interest calculated on invested amount plus accumulated interest.
11.	Nonmonetary asset	k.	A series of equal-sized cash flows.
12.	Time value of money	l.	Amount of money required today that is equivalent to a given future amount.
13.	Monetary liability	m.	Claim to receive a fixed amount of money.

Determine the present value of the following single amounts (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):