Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You would like to have $ 5 0 0 0 0 in 1 6 years. To accumulate this amount, you plan to deposit an equal

You would like to have $50000 in 16 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 6 percent interest compounded annually. Your first payment will be made at the end of the year.
a.How much must you deposit annually to accumulate this amount?
b.If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should this lump-sum deposit be?(Assume you can earn 6 percent on this deposit.)
c.At the end of five years, you will receive $10000 and deposit this in the bank toward your goal of $50000 at the end of year 16. In addition to the lump-sum deposit, how much must you deposit in equal annual amounts, beginning in year 1 to reach your goal? (Again, assume you can earn 6 percent on your deposits.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets And Institutions

Authors: Jeff Madura

5th Edition

0324027443, 9780324027440

More Books

Students also viewed these Finance questions

Question

Do you have little trouble staying up past midnight? Yes No

Answered: 1 week ago

Question

What factors infl uence our perceptions?

Answered: 1 week ago