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Determine the amount of money in a savings account

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Reference no: EM132816033

(1) Determine the amount of money in a savings account at the end of one years, given an initial deposit of $9,500 and an 12 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly. (Use a Financial calculator to arrive at the answers. Round the final answers to the nearest whole dollar.)

Future value a.Annually$ b.Semiannually$ c.Quarterly$

Calculate the effective annual interest rate of each compounding possibility. (Use a Financial calculator to arrive at the answers. Round the final answers to 2 decimal places.)

Effective annual interest rate a.Annually % b.Semiannually % c.Quarterly %

(2) Carrie Tune will receive $18,500 a year for the next 18 years as payment for a song she has just written. If a present 12 percent discount rate is applied: (Use a Financial calculator to arrive at the answers. Round the final answers to the nearest whole dollar.)

a-1. Calculate the present value.

Present value $

a-2. Should she be willing to sell out her future rights now for $162,000?

-Yes

-No

b-1. Calculate the present value if the payments will be made at the beginning of each year.

Present value $

b-2. Would she be willing to sell her future rights now for $162,0000, if the payments will be made at the beginning of each year?
multiple choice 2

-No
-Yes

(3) S. Ken Flint retired as president of Colour Tile Company, but he is currently on a consulting contract for $63,000 per year for the next 10 years. (Use a Financial calculator to arrive at the answers. Round the final answers to the nearest whole dollar.)

a. If Mr. Flint's opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?

Present value $

b. Assuming Mr. Flint will not retire for two more years and will not start to receive his ten payments until the end of the third year, what would be the value of his deferred annuity?

Present value $

c. Recalculate part a assuming the contract stipulates that payments are to be made at the beginning of each year.

Present value $

Reference no: EM132816033

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