Question

I could really use your help this is for a final grade! Thank you so much!!

Adams Fillmore’s lifelong dream is to own his own fishing boat to use in his retirement. Adams has recently come into an inheritance of $431,700. He estimates that the boat he wants will cost $326,200 when he retires in 6 years.

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How much of his inheritance must he invest at an annual rate of 6% (compounded annually) to buy the boat at retirement? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment amount

$

Newman Freeman is investing $8,743 at the end of each year in a fund that earns 8% interest.

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In how many years will the fund be at $93,000? (Round answer to 0 decimal places, e.g. 45.)

Years

Chris Tyler’s VISA balance is $1,179.64. He may pay it off in 12 equal end-of-month payments of $115 each.

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What interest rate is Chris paying? (Round answer to 1 decimal place, e.g. 8.5%.)

Interest Rate

%

per month

Answer 1

Solution 1:

Required future value = $326,200

Period = 6 years

Interest rate = 6%

Amount to be invested= $326,200 * PV factor at 6% for 6th period

= $326,200 * 0.70496 = $229,958

Solution 2:

Annual deposit = $8,743

Future value = $93,000

Interest rate = 8%

Let it will take n year to reach the goal

Now

$8,743 * Cumulative FV factor at 8% for n periods = $93,000

Cumulative FV factor at 8% for n periods = 10.63708

Refer FV factor table, this factor falls at n = 8 years

Solution 3:

Let monthly interest rate = i

nos of monthly period = 12

$115 * Cumulative PV factor at i for 12 periods = $1,179.64

Cumulative PV factor at i for 12 periods = 10.2577

Refer PV factor table this factor falls at i =2.50%

Hence interest rate = 2.50% per month