Cirele the best answer. Show calculations for each problem in the space provided
ID: 2440007 • Letter: C
Question
Cirele the best answer. Show calculations for each problem in the space provided or on a separate sheet of paper You deposit $3.500 in a retirement investment account today that eams 12% per year with monthly compounding. In addition, you deposit $100 at the end of every month starting one month from now and continue to do so for 5 years. The amount that has accumulated in this account at the end of 5 years is nearest to: a) $5,000 b) $7,000 c) $14,000 d) $28,000 An investment strategy consists of deposits that are made into an account at the end of every quarter for the next 10 year The deposits start at $100 and increase by $50 each quarter thereafter. Interest earned is 2% per quarter. The present alue of this investment strategy is nearest to: a) $12,000 b) $25,000 c) $50,000 d) $100,000Explanation / Answer
Amount accumulated after 5 years (use an interest rate of 1 percent per month) = 3500(F/P, 1%, 60) + 100(F/A, 1%, 60) = 3500*1.8167 + 100*81.6697 = 14525. Select 14000
Present value of the investment = 100(P/A, 2%, 40) + 50(P/G, 2%, 40) = 100*27.3555 + 50*461.9931 = 25835. Select 25000