Question
For each of the following cases, indicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up
For each of the following cases, indicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up the future value factor.
(1) In Table 1 (future value of 1):
Annual Rate Number of Years Invested Compounded
Case A 4% 4 Annually
Case B 12% 3 Semiannually
(a) (b)
Case A % periods
Case B % periods
(2) In Table 2 (future value of an annuity of 1):
Annual Rate Number ofYears Invested Compounded
Case A 5% 6 Annually
Case B 16% 8 Semiannually
(a) (b)
Case A % periods
Case B % periods
2) Bates Company issued $1,000,000, 9-year bonds. It agreed to make annual deposits of $77,500 to a fund (called a sinking fund), which will be used to pay off the principal amount of the bond at the end of 9 years. The deposits are made at the end of each year into an account paying 9% annual interest.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What amount will be in the sinking fund at the end of 9 years? (Round answer to 2 decimal places, e.g. 25.25.)
Amount in the sinking fund $
3 ) Messi Company is considering an investment that will return a lump sum of $750,000 4 years from now.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What amount should Messi Company pay for this investment to earn an 11% return? (Round answer to 2 decimal places, e.g. 25.25.)
Messi Company should pay $
4 ) Lloyd Company earns 6% on an investment that will return $455,000 7 years from now.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What is the amount Lloyd should invest now to earn this rate of return? (Round answer to 2 decimal places, e.g. 25.25.)
Lloyd Company should invest $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started