Do calculations on scrap paper as needed. Worked-out solutions are provided at end.
- Calculate by table the value of an investment after three years on an ordinary annuity of $6,000 made semiannually at 6%.
- Redo your calculation in No. 1 assuming an annuity due.
- Nancy Cram won the Boston Lottery and will receive a $5,000 check at the beginning of each six months for the next seven years. If Nancy deposits each check into an account that pays 8%, how much will she have at the end of the seven years?
- What must you invest today to receive a $6,000 annuity for 10 years quarterly at 8% annual rate? All withdrawals will be made at the end of each period.
- Pete O'Sullivan wants to set up a scholarship fund to provide six $4,000 scholarships for the next five years. If money can be invested at an annual rate of 6%, how much should Pete invest today?
- Long Co. issued bonds that will mature to a value of $80,000 in eight years. Long is setting up a sinking fund. Interest rates are 8%, compounded quarterly. What will be the amount of each sinking fund payment? Verify your answer by the amount of annuity. It will be off due to rounding of tables. (Use the tables in Business Math Handbook.)
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