Show how to get answer. 8. You need to accumulate $86,373 for your son\'s educat
ID: 2643825 • Letter: S
Question
Show how to get answer.
8.
You need to accumulate $86,373 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 12 years. The savings account pays 8.30 percent per year, compounded annually.
Round the answer to two decimal places.
9.
You plan to buy the house of your dreams in 17 years. You have estimated that the price of the house will be $103,159 at that time. You are able to make equal deposits every month at the end of the month into a savings account at a rate of 14.20 percent, compounded monthly. How much money should you place in this savings account every month in order to accumulate the required amount to buy the house of your dreams?
Round the answer to two decimal places.
Explanation / Answer
1. Future value = $ 86,373 We need to find equal year end deposit - annuity or PMT @ 8.30% p.a. for 12 years formula = FV = PMT [ ( ( 1 + i )^n -1 ) / i ] 86373 = PMT [ ( ( 1 + 0.0830 )^12 -1 ) /0.0830 ] 86373 = PMT [ ( ( 1.0830 )^12 -1 ) /0.0830 ] = $ 4471.09 2. Future value of house = $ 103,159 We need to find equal month end deposits for 17 years @ 14.2% n = 17 years = 204 months; I = 14.2% p.a. /12 = 1.18 % p.m. = 0.0118 FV = PMT [ ( ( 1 + i )^n -1 ) / i ] 103159 = PMT [ { { 1 + 0.0118) ^204 - 1 } / 0.0118 } = $ 122.37