John Rider wants to accumulate $85,000 to be used for his daughters college education. He would like to have the amount available on December 31, 2021. Assume that the funds will accumulate in a certificate of deposit paying 8% interest compounded annually. (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.)

Answer each of the following independent questions.

Required:
1.	If John were to deposit a single amount, how much would he have to invest on December 31, 2016?

2.	If John were to make five equal deposits on each December 31, beginning on December 31, 2017, what is the required amount of each deposit?

3.	If John were to make five equal deposits on each December 31, beginning on December 31, 2016, what is the required amount of each deposit?

References

eBook & Resources

WorksheetLearning Objective: 06-04 Solve for either the interest rate or the number of compounding periods when present value and future value of a single amount are known.

Difficulty: 2 MediumLearning Objective: 06-08 Solve for unknown values in annuity situations involving present value.

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