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NeX [460]
3 years ago
8

Janet Boyle intends to deposit $300 per year in a credit union for the next 10 years, and the credit union pays an annual intere

st rate of 8%. A. Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1) $300 is deposited annually and the credit union pays interest annually. (2) $150 is deposited semiannually and the credit union pays interest semiannually. (3) $75 is deposited quarterly and the credit union pays interest quarterly. B. Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.
Business
1 answer:
Fiesta28 [93]3 years ago
6 0

Answer:

A(1) Future value of annual deposit = $4,345.97

A(2) Future value of semiannual deposit = $4,466.71

A(3) Future value of quarterly deposit = $4,530.15

B. The more frequent deposits and compounding of interest are, the higher the future value of an annuity of an annuity will be.

Explanation:

A(1). Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn if (1) $300 is deposited annually and the credit union pays interest annually.

These can be calculated using the Future Value (FV) of an Ordinary Annuity as follows:

FVA = P * (((1 + r)^n - 1) / r) ................................. (1)

Where,

FVA = Future value of the annual deposit = ?

P = Annual deposit = $300

r = Annual interest rate = 8%, or 0.08

n = number of years = 10

Substituting the values into equation (1), we have:

FVA = $300 * (((1 + 0.08)^10 - 1) / 0.08)

FVA = $4,345.97

A(2). Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn if (2) $150 is deposited semiannually and the credit union pays interest semiannually.

These can be calculated using the Future Value (FV) of an Ordinary Annuity as follows:

FVS = P * (((1 + r)^n - 1) / r) ................................. (2)

Where,

FVS = Future value of the semiannual deposit = ?

P = Semiannual deposit = $150

r = Semiannual interest rate = 8% / 2 = 0.08 / 2 = 0.04

n = number of semiannual = 10 * 2 = 20

Substituting the values into equation (2), we have:

FVS = $150 * (((1 + 0.04)^20 - 1) / 0.04)

FVS = $4,466.71

A(3). Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn if (3) $75 is deposited quarterly and the credit union pays interest quarterly.

These can be calculated using the Future Value (FV) of an Ordinary Annuity as follows:

FVQ = P * (((1 + r)^n - 1) / r) ................................. (3)

Where,

FVQ = Future value of the semiannual deposit = ?

P = Quarterly deposit = $75

r = Quarterly interest rate = 8% / 4 = 0.08 / 4 = 0.02

n = number of quarters = 10 * 4 = 40

Substituting the values into equation (3), we have:

FVQ = $75 * (((1 + 0.02)^40 - 1) / 0.02)

FVQ = $4,530.15

B. Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.

Since the future value of quarterly deposit of $4,530.15 is greater than the future value of semiannual deposit of $4,466.71 which on its own is also greater than the future value of annual deposit of $4,345.97, this implies that the more frequent deposits and compounding of interest are, the higher the future value of an annuity will be.

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Which one of the following statements is false concerning the term structure of interest rates? A. Expectations of lower inflati
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Answer:

C- The term structure of interest rates and the time to maturity are always directly related

Explanation:

The term structure of interest rates represents the relationship that exist between interest rates and different terms (maturities). When it is graphed, the term structure receive the name of "yield curve".

Generally, yields increase at the same time maturity does it, this create an upward-sloping yield curve or a normal yield curve. But occasionally, long term yield can fall below short term yields, and this create an inverted yield curve that is regarded as it a recession is likely occurring or approaching.

5 0
3 years ago
Negative performance reviews that lack measurable and realistic goals are most likely to
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The correct answer is demoralize employees.

When a manager is conducting an employee’s negative performance review they need to accompany it with measurable and realistic goals. An employee needs to be given realistic goals to achieve so that they know how they can earn an acceptable review. A negative performance review without measurable and realistic goals will demoralize employees.

8 0
3 years ago
On January 1, 2017, Swen paid $184,000 for $200,000 of the 8%, 20-year bonds of Penn Corporation, issued on January 1, 2013, at
zimovet [89]

The determination of the gain and the character of the gain if the Penn Corporation bonds are sold by Swen on January 1, 2019, for the proceeds of each sale is as follows:

                                        (a)                          (b)                      (c)

Sales proceeds          $191,000             $185,750          $183,000

Carrying value           $185,600            $185,600          $185,600

Capital gain (loss)       $5,400                    $150            ($2,600)

<h3>What is the carrying value of bonds?</h3>

The carrying value of a bond is the net amount between the bond's face value plus (minus) any unamortized premiums or discounts.

The carrying value is the book value of the bond.

When a bond receivable is sold, capital gain or loss is realized from the sale, which gives rise to capital gain tax.

<h3>Data and Calculations:</h3>

Bond's price = $184,000

Face value of bonds receivable = $200,000

Premium received = $16,000 ($200,000 - $184,000)

Interest rate = 8%

Maturity period = 20 years

Payment date = January 1, 2017

Straight-line amortization of premium = $800 ($16,000/20)

Carrying value after two years, January 1, 2019, = $185,600 ($184,000 + $1,600)

                                           (a)                          (b)                      (c)

Sales proceeds             $191,000             $185,750          $183,000

Carrying value              $185,600            $185,600          $185,600

Capital gain (loss)          $5,400                    $150            ($2,600)

Carrying value:

Face value                  $200,000

Unamortized premium  $14,400 ($16,000 - $1,600)

Carrying value            $185,600

Learn more about capital gain from bond sales at brainly.com/question/19422959

8 0
2 years ago
Which of the following sales and collection process activities can result in the creation of an account receivable? Receiving a
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Answer:

Sales and collection process

At the point when items and administrations are sold by a firm to its clients and consequently the clients pay for the item and administrations, it is a procedure which includes deals just as an assortment. The deals and assortment process covers all the business exercises identified with selling of item and administrations, upkeep of client records, charging and recording installments made by the clients. Overseeing accounts receivables through maturing accounts and approving credit likewise goes under deals and assortment process.  

In deals and assortment process all the bookkeeping exchanges are created that record deals income, accounts receivables and receipts in real money. This procedure likewise influences those association's expenses of products sold and stock that participate in selling stock. Deals are commonly made in kind of money or credit. It might likewise incorporate deals charge.  

At the point when a deal is made in kind for money, the parity of money increments and when using a credit card, the records receivables are made which is the cash that is owed to the firm from deals of item and administrations. Lastly, when a credit client pays money, the money balance increments and records receivables are decline by the sum paid.  

  1. Accepting a request for deals from a client doesn't make any records receivables. In the wake of getting the request the items are created first and afterward conveyed. A short time later the receipt is created and ultimately, sent to the client.  Thus, option a is incorrect.
  2. When selling is done, the clients are charged according to the statements chose the two gatherings and afterward in the wake of sending receipt the assortment is made.  Thus, option c is also incorrect.
  3. Recording of installment is made. at the point when clients really pay the measure of deals whether deals is made in real money or credit.  Thus. option d is also incorrect.
  4. The alternative e expresses that none of the choices delineates the movement in regard to the making of records receivables which is additionally off base in light of the fact that the one choice is right out of the all choices.  
  5. At the point when the arranged completed merchandise are dispatched to the client and deals is using a loan, at that point the record receivables is made subsequent to sending the receipt to the clients.  Thus, the correct option is option B

5 0
3 years ago
You expect KT industries​ (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these
snow_lady [41]

Answer:

Value of a share = $15

Explanation:

<em>According to the </em><u><em>dividend valuation model</em></u><em>, the value of a share is the present value of expected dividend discounted at the required rate of return. </em>

This model is expressed in the formula below;

Value of a share = D/Ke

D- dividend payable in year one

Ke- cost of equity

Value of a share = 2.25/0.15

Value of a share = $15

Value of a share = $15

7 0
3 years ago
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