Question

1. Compute the Future Value of a 20-year annuity that pays $15,000 per year. Assume an interest rate of 10.00 percent. Puck currently has $10,000 in his bank account which pays 4.00 %, compounded monthly. How much must Puck save every month, if he wants to accumulate a total of $15,000 in 5 years? 3. Assume that Schuester Bancorp is paying 3.50 percent, compounded weekly, on new deposits. How many years will it take for an initial deposit to triple in value?

Answer 1

1)	FVA = 15000*(1.1^20-1)/(0.1*1.1^20) =	$ 1,27,703.46
2)	FV of the amount of 10000 in hand = 10000*(1+0.04/12)^60 =	$     12,209.97
	Balance to be accumulated to reach $15000 = 15000-12209.97 =	$       2,790.03
	The amount of $2790.03 is the FV of the monthly payments to be
	made. Using the formula for finding FV of annuity,
	the monthly installments to be paid = 2790.03*(0.04/12)*(1+0.04/12)^60/((1+0.04/12)^60-1)) =	$             51.38
3)	The weekly interest = 0.035/52
	Equating the required values,
	PV*3=PV*(1+0.035/52)^n, where n = number of weeks.
	Solving for n
	3 = (1+0.035/52)^n
	Taking log of both sides
	log3 = n*log1.0006730
	n = log3/log1.0006730
	n = 0.47712125472/0.00029218187814 = 1632.96 weeks
	= 1632.96/52 = 31.40 years
	Number of years for the deposit to triple in value =	31.40 years