Question

Question 13

Answer 1

The amount to be invested today so as to have $12,500 in 12 years is  $6,480.37.

The amount that would be in my account in 13 years is $44,707.37.

The amount I need to deposit now is $546.64.

How much should be invested today?

The amount to be invested today = future value / (1 + r)^nm

Where:

• r = interest rate = 5.5 / 365 = 0.015%
• m = number of compounding = 365
• n = number of years  = 12

12500 / (1.00015)^(12 x 365) = $6,480.37

What is the future value of the account at the end of 13 years?

Future value = monthly deposits x annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

• r = interest rate = 5.3 / 12 = 0.44%
• n = 13 x 12 = 156

200 x [{(1.0044^156) - 1} / 0.0044] = $44,707.37

What should be the monthly deposit?

Monthly deposit = future value / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

• r = 6.7 / 12 = 0.56%
• n = 2 x 12 = 24

$14,000 / [{(1.0056^24) - 1} / 0.0056] = $546.64

To learn more about annuities, please check: brainly.com/question/24108530

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