Question
Answer the following: A. Suppose you are trying to accumulate a balance of $10,000 by the end of 8 years. You are trying to figure
Answer the following:
A. Suppose you are trying to accumulate a balance of $10,000 by the end of 8 years. You are trying to figure out how much you would have to save at the beginning of each year for the next 8 years in an account earning 3% interest to reach your target. Which formula would you use to solve for the cash flows?
FV of an annuity
PV of an annuity
FV of an annuity due
PV of an annuity due
PV of a perpetuity
B. Suppose you have $10,000 in an account earning 3% interest per year. You would like to make annual withdrawals at the end of each year for the next 8 years. You are trying to figure out the most you could withdraw annually without depleting the account before 8 years. Which formula would you need to use to solve for the cash flows?
FV of an annuity due
PV of an annuity due
FV of an annuity
PV of an annuity
PV of a perpetuity
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Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
