Question 369433: Hello. My name is Rachel. Course Hero is asking me to answer your question or assignment, because it falls within my area of expertise:
"1. Mike’s Sport Shop deposits $3,600 at the end of each year for 12 years at 7% annual interest.
a. How much will this ordinary annuity be worth at the end of the 12 years?
b. How much more will this annuity be worth (annuity due) if Mike deposits the money at the beginning of each year instead of at the end of each year?
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2. Barb and John Reed want to know how much they must deposit in a retirement savings account today to have payments of $1,750 every six months for 15 years. The retirement account is paying 8% annual interest, compounded semiannually.
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3. Lena Dimock is saving for her college expenses. She sets aside $200 at the beginning of each three months in an account paying 8% annual interest, compounded quarterly. How much will she have accumulated in the account at the end of four years?
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Julie has just completed the rigorous process of becoming a Certified Financial Planner (CFP). She is looking forward to working with individuals on saving for retirement. She would like to show her clients the value of an annuity program as one of the best options for investing current earnings in a tax-deferred account.
1. If a client puts the equivalent of $55 per month, or $660 per year, into an orginary annuity, how much money would accumulate in 20 years at 3% compounded annually?
2. Jackie, a 25 year old client, want to retire by age 65 with $2,000,000. How much would she have to invest annually, assuming a 6% rate of return?
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3. Another client, Wynona, decides that she will invest $5,000 per year in a 6% annuity for the first ten years, then $6,000 for the next ten years, and then $4,000 per year for the last ten years, how much will she accumulate? [Hint: Treat each ten-year period as as separate annuity and compute the Future Value. After the ten years, assume that the value will continue to grow at compound interest for the remaining years of the 30 years. Use tables from Unit 6 to compute compound interest.] (5 points)
1% 1.50% 2% 2.50% 3% 4% 5% 6% 8% 10% 12%
1 1.010 1.015 1.020 1.025 1.030 1.040 1.050 1.060 1.080 1.100 1.120
2 1.020 1.030 1.040 1.051 1.061 1.082 1.103 1.124 1.166 1.210 1.254
3 1.030 1.046 1.061 1.077 1.093 1.125 1.158 1.191 1.260 1.331 1.405
4 1.041 1.061 1.082 1.104 1.126 1.170 1.216 1.262 1.360 1.464 1.574
5 1.051 1.077 1.104 1.131 1.159 1.217 1.276 1.338 1.469 1.611 1.762
6 1.062 1.093 1.126 1.160 1.194 1.265 1.340 1.419 1.587 1.772 1.974
7 1.072 1.110 1.149 1.189 1.230 1.316 1.407 1.504 1.714 1.949 2.211
8 1.083 1.126 1.172 1.218 1.267 1.369 1.477 1.594 1.851 2.144 2.476
9 1.094 1.143 1.195 1.249 1.305 1.423 1.551 1.689 1.999 2.358 2.773
10 1.105 1.161 1.219 1.280 1.344 1.480 1.629 1.791 2.159 2.594 3.106
11 1.116 1.178 1.243 1.312 1.384 1.539 1.710 1.898 2.332 2.853 3.479
12 1.127 1.196 1.268 1.345 1.426 1.601 1.796 2.012 2.518 3.138 3.896
13 1.138 1.214 1.294 1.379 1.469 1.665 1.886 2.133 2.720 3.452 4.363
14 1.149 1.232 1.319 1.413 1.513 1.732 1.980 2.261 2.937 3.798 4.887
15 1.161 1.250 1.346 1.448 1.558 1.801 2.079 2.397 3.172 4.177 5.474
16 1.173 1.269 1.373 1.485 1.605 1.873 2.183 2.540 3.426 4.595 6.130
17 1.184 1.288 1.400 1.522 1.653 1.948 2.292 2.693 3.700 5.054 6.866
18 1.196 1.307 1.428 1.560 1.702 2.026 2.407 2.854 3.996 5.560 7.690
19 1.208 1.327 1.457 1.599 1.754 2.107 2.527 3.026 4.316 6.116 8.613
20 1.220 1.347 1.486 1.639 1.806 2.191 2.653 3.207 4.661 6.728 9.646
21 1.232 1.367 1.516 1.680 1.860 2.279 2.786 3.400 5.034 7.400 10.804
22 1.245 1.388 1.546 1.722 1.916 2.370 2.925 3.604 5.437 8.140 12.100
23 1.257 1.408 1.577 1.765 1.974 2.465 3.072 3.820 5.871 8.954 13.552
24 1.270 1.430 1.608 1.809 2.033 2.563 3.225 4.049 6.341 9.850 15.179
25 1.282 1.451 1.641 1.854 2.094 2.666 3.386 4.292 6.848 10.835 17.000
26 1.295 1.473 1.673 1.900 2.157 2.772 3.556 4.549 7.396 11.918 19.040
27 1.308 1.495 1.707 1.948 2.221 2.883 3.733 4.822 7.988 13.110 21.325
28 1.321 1.517 1.741 1.997 2.288 2.999 3.920 5.112 8.627 14.421 23.884
29 1.335 1.540 1.776 2.046 2.357 3.119 4.116 5.418 9.317 15.863 26.750
30 1.348 1.563 1.811 2.098 2.427 3.243 4.322 5.743 10.063 17.449 29.960
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Answer by robertb(5830)   (Show Source):
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