HomeworkLib
Question

An individual is planning to set-up an education fund for his grandchildren. He plans to invest...

An individual is planning to set-up an education fund for his grandchildren. He plans to invest $12,500 annually at the end of each year. He expects to withdraw money from the fund at the end of 8 years and expects to earn an annual return of 6%. What will be the total value of the fund at the end of 8 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Multiple Choice

  • $123,719.

  • $194,739.

  • $100,000.

  • $56,836.

  • $77,623.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Solution:

Invested amount = $12,500

Interest rate = 6%

Period = 8 years

Future value of the fund = $12,500 * cumulative FV factor at 6% for 8 periods of ordinary annuity

= $12,500 * 9.89747

= $123,719

Hence first option is correct.

0 0
Add a comment
Know the answer?
Add Answer to:
An individual is planning to set-up an education fund for his grandchildren. He plans to invest...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Claire Fitch is planning to begin an individual retirement program in which she will invest $3,900...

    Claire Fitch is planning to begin an individual retirement program in which she will invest $3,900 at the end of each year. Fitch plans to retire after making 30 annual investments in the program earning a return of 12%. What is the value of the program on the date of the last payment (30 years from the present)? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round FVA...

  • Marshall has received an inheritance and wants to invest a sum of money today that will...

    Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

  • Bill Padley expects to invest $21,000 for 8 years, after which he wants to receive $38,868.90....

    Bill Padley expects to invest $21,000 for 8 years, after which he wants to receive $38,868.90. What rate of interest must Padley earn? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Future Value Present Value Table Factor Interest Rate

  • Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who...

    Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who will start college in one year. The judge plans to deposit an amount in a savings account that pays 7% annual interest. He wants to deposit an amount that is sufficient to permit Emma to withdraw $20,500 for tuition starting in one year and continuing each year for a total of four years. (FV of $1, PV of $1 FVA of $1, and PVA...

  • A company needs to have $105,000 in 5 years, and will create a fund to insure...

    A company needs to have $105,000 in 5 years, and will create a fund to insure that the $105,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $105,000 at the end of 5 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $78,467 $98,700 $140,506 $31,500 $73,500

  • Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who will start college in on...

    Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who will start college in one year. The judge plans to deposit an amount in a savings account that pays 7% annual interest. He wants to deposit an amount that is sufficient to permit Emma to withdraw $21,100 for tuition starting in one year and continuing each year for a total of four years. (FV of $1, PV of $1, FVA of $1, and PVA...

  • Jeannie plans to deposit $6,000 in a money market sinking fund at the end of each...

    Jeannie plans to deposit $6,000 in a money market sinking fund at the end of each year for the next four years. What is the amount that will accumulate by the end of the fourth and final payment if the sinking fund earns 9% interest? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar...

  • John has an investment opportunity that promises to pay him $12,500 in four years. He could...

    John has an investment opportunity that promises to pay him $12,500 in four years. He could earn a 5% annual return investing his money elsewhere. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the maximum amount he would be willing to invest in this opportunity? (Round your final answers to the nearest whole dollar amount.)

  • Mike Derr Company expects to earn 6% per year on an investment that will pay $616,000...

    Mike Derr Company expects to earn 6% per year on an investment that will pay $616,000 five years from now. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Compute the present value of this investment. Table Factor Present Value Future Value $ 616,000 On January 1, a company agrees to pay $20,000 in six years. If the annual interest rate is...

  • Exercise C-6 Calculate the future value of an annuity (LOC-3) GMG Studios plans to invest $49,000...

    Exercise C-6 Calculate the future value of an annuity (LOC-3) GMG Studios plans to invest $49,000 at the end of each year for the next five years. There are three investment options available Interest Annual Rate Compounded Invested Annually Annually Annually Period Option 1 Option 2 Option 3 5% 5 years 5 years 5 years 10 Required Determine the accumulated investment amount by the end of the fifth year for each of the options. (FV of $1, PV of $1,...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT