Samos has to decide between the four payment plans

Reference no: EM13568856

Taylor would like to retire on December 31, 2024, and take a trip around the world. In order to do this, she feels she must accumulate $200,000 in her retirement account by that date. She is willing to deposit a certain amount each year into her retirement account, which earns 12% interest compounded annually. Taylor will make the first deposit on December 31, 2015, and the last deposit on December 31, 2024.

Determine the amount Taylor must deposit into her retirement account each year. Clearly label all work.

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8.Using the appropriate interest tables, answer each of the following questions.

a.Jane has a $35,000 bank loan that she wishes to pay off in five equal annual payments with 12% interest. If the first payment is due one year from today, what will be the amount of the annual payment necessary?

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b.Joan wants to borrow some money from the bank to start a small business. Joan can afford to pay off the loan in 15 annual installments of $9,500. The bank charges an annual interest rate of 12%. If Joan makes the first payment one year from the date of the loan, how much can Joan borrow?

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9.Beginning December 31, 2014, ten equal, annual withdrawals are to be made. Using the appropriate tables, determine the equal, annual withdrawals if $140,000 is invested on January 1, 2014 at an interest rate of 10% compounded annually.

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10.Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing between four different payments plans.

a.$500,000 due immediately in cash

b.$150,000 down payment due immediately; $60,000 per year for 10 years, beginning at the end of the current year

c.$150,000 down payment due immediately; $30,000 per year for 4 years beginning at the end of the current year; $80,000 per year for 8 years beginning at the end of the fourth year after the initial purchase

d.$65,000 due immediately and at the beginning of each of the next 11 years

Samos has to decide between the four payment plans, whichever one provides the smallest present value will be chosen. The effective interest rate during the future periods is 10%. Which option should Samos choose?

Reference no: EM13568856

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