Assume that 4 years from now you will need $1,000. Your bank compounds interest at an

8% annual rate.

a. How much must you deposit 1 year from now to have a balance of $1,000 at Year 4?

b. If you want to make equal payments at the end of Years 1 through 4 to accumulate the $1,000,

how large must each of the 4 payments be?

c. If your father were to offer either to make the payments calculated in part b ($221.92) or to

give you a lump sum of $750 one year from now, which would you choose?

d. If you will have only $750 at the end of Year 1, what interest rate, compounded annually,

would you have to earn to have the necessary $1,000 at Year 4?

e. Suppose you can deposit only $186.29 each at the end of Years 1 through 4, but you still need

$1,000 at the end of Year 4. What interest rate, with annual compounding, is required to achieve

your goal?