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What is the future value of this annuity

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Problem - Now consider the second alternative-5 annual payments of $2,000 each. Assume that the payments are made at the end of each year.

a. What type of annuity is this?

b. What is the future value of this annuity if the payments are invested in an account paying 10.0 percent interest annually?

c. What is the future value if the payments are invested with the First National Bank which offers semiannual compounding?

d. What size payment would be needed to accumulate $20,000 under annual compounding at a 10.0 percent interest rate?

e. What lump sum, if deposited today, would produce the same ending value as in Part b?

f. Suppose the payments are only $1, 000 each, but they are made every 6 months, starting 6 months from now. What would be the future value if the 10 payments were invested at 10.0 percent annual interest? It they were invested at the First National Bank which offers semiannual compounding?

Reference no: EM133011344

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