Question

1. Michael invests $2000 in an annuity that offers an interest rate of 4% compounded quarterly for 5 years. What is the value of Michael's investment after 5 years? $2102.02 $4382.25 $2440.38 $2433.31 2.
Suppose you invest $50 a month in an annuity that earns 48% APR compounded monthly. How much money will you have in this account after 2 years? $1536.19 $751.29 $1954.13 $2001.29
3. Danielle invests $50 a month in an annuity that earns 4% APR and is compounded monthly. What is the future value of Danielle's account in 3 years? $1843.29 $2153.85 $1909.06 $2082.39
4. Suppose you invest $10,000 at the age of 40, and agree to start receiving payments at the age of 50. At age 48, you decide you want to withdraw $2500 from your account. What is the IRS fee you will have to pay? Remember, the IRS charges 10% if you withdraw before you are 59.

5. Show your work to get full credit! 5. Suppose you invest $20,000 at the age of 40, and agree to start receiving payments at the age of 50. At age 47, you decide you want to withdraw $7500 from your account. The insurance company charges you 50% of the withdrawal. What is the surrender charge? (Show all work to get full credit!)

Answer 1

1. The formula for annual compound interest, including principal sum, is:

A = P (1 + r/n)ⁿˣ

Where:

A = the future value = ?
P = the principal investment amount = $2000
r = interest rate = 4%
n = the number of times that interest is compounded per year = 4
x = the number of years = 5

Calculations:

A = 2000 (1 + 0.04/4)²⁰

A = 2000 (1 + 0.01)²⁰

A = 2000 (1.01)²⁰

A = 2000 ₓ 1.22

A = $2440.38 

2. The formula for annual compound interest, including principal sum, is:

A = P (1 + r/n)ⁿˣ

Where:

A = the future value = ?
P = the principal investment amount = $50
r = interest rate = 48%
n = the number of times that interest is compounded per year = 12
x = the number of years = 2

Calculations:

A = 50 (1 + 0.48/12)²⁴

A = 50 (1 + 0.04)²⁴

A = 50 (1.04)²⁴

A = 50 ₓ 2.56

A = $128.16

3. The formula for annual compound interest, including principal sum, is:

A = P (1 + r/n)ⁿˣ

Where:

A = the future value = ?
P = the principal investment amount = $50
r = interest rate = 4%
n = the number of times that interest is compounded per year = 12
x = the number of years = 3

Calculations:

A = 50 (1 + 0.04/12)³⁶

A = 50 (1 + 0.003)³⁶

A = 50 (1.003)³⁶

A = 50 ₓ 1.12

A = $56.36

Answer 2

Answer:2440.38

Step-by-step explanation: