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Periods 4.50% Interest Factors 6.00% 6.50% 7.00% 5.00% 5.50% 1.3609 1.4221 1.4071 1.4775 7.50% 1.6590 1.4547 1.5347 8.00% 8.5
Grace To celebrate her first birthday, Graces parents deposited, on that date, $2,500 into a savings account that earns a fi
What If Scenario 2 of her 18th birthday, then how much should they have placed on deposit on If Graces parents wanted to acc
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Answer #1

(a) Initial Deposit = $ 2500, Interest Rate = 7.5 % and Tenure = 18 years

Future Value of Deposit at the end of Year 18 = 2500 x (1.075)^(18) = $ 9189.51 ~ $ 9190

Hence, the correct option is (1)

(b) Initial Deposit = $ 2500, Deposit made on 10th birthday, Tenure = 8 years and Interest Rate = 7.5%

Future Value of Deposit = 2500 x (1.075)^(8) = $ 4458.69 ~ $ 4459

Hence, the correct option is (3)

(c) Target Future Value = $ 5000, Interest Rate = 7.5 % and Tenure = 18 years

Hence, required Initial Deposit = 5000 / (1.075)^(18) = $ 1360.25 ~ $ 1360

Hence, the correct option is (1)

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