6-5 Wiseman Video plans to make four annual deposits of $2,000 each to a special building fund. The fund’s assets will be invested in mortgage instruments expected to pay interest at 12% on the fund’s balance. Using the appropriate annuity table, determine how much will be accumulated in the fund on December 31, 2012,under each of the following situations:
1. The first deposit is made on December 31, 2009, and interest is compounded annually.
2. The first deposit is made on December 31, 2008, and interest is compounded annually.
3. The first deposit is made on December 31, 2008, and interest is compounded quarterly.
4. The first deposit is made on December 31, 2008, interest is compounded annually, and interest earned is withdrawn at the end of each year.
6-6 Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2009, of a five-period annual annuity of $5,000 under each of the following situations:
1. The first payment is received on December 31, 2010, and interest is compounded annually.
2. The first payment is received on December 31, 2009, and interest is compounded annually.
3. The first payment is received on December 31, 2010, interest is compounded quarterly.
6-10 Answer each of the following:
1. Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $64,000 cash immediately, (2) $20,000 cash immediately and a six-period annuity of $8,000 beginning one year from today or (3) a six period annuity of $13,000 beginning one year from today. Assuming an interest rate of 6%, which option should Alex choose?
2. The Weirmer Corp wants to accumulate a sum of money to repay certain debts due on December 31, 2018. Weimer will make annual deposits of $100,000 into a special bank account at the end of each 10 years beginning December 31, 2009. Assuming the bank account pays 7% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2018?
. On exercise 6-5, what is the future value of an ordinary annuity in #1? (Points: 4)
8. On exercise 6-5, what is the total amount in #3? (Points: 4)
9. On exercise 6-5, what is the future value in #4? (Points: 2)
10. On exercise 6-6, what is the present value in #1? (Points: 2)
11. On exercise 6-6, what is the present value in #2? (Points: 2)
12. In exercise 6-10, what is the present value of scenario 1 under #1? (Points: 2)
13. In exercise 6-10, what is the present value of scenario 2 under #1? (Points: 2)
14. In exercise 6-10, what is the present value of scenario 3 under #1? (Points: 2)
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