1. You have $10,026.61 in a brokerage account, and you plan to deposit an additional $5,000...

1. You have $10,026.61 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $220,000. You expect to earn 11% annually on the account. How many years will it take to reach your goal? Round your answer to two decimal places at the end of the calculations.

____ years

2. An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4, $300 at the end of Year 5, and $550 at the end of Year 6.

If other investments of equal risk earn 10% annually, what is its present value? Round your answer to the nearest cent.

$ _____
If other investments of equal risk earn 10% annually, what is its future value? Round your answer to the nearest cent.

$ _____

Expert Solution

1.

Year	Deposit	Opening Balance [Previous Closing+Deposit]	Interest [Opening Balance*(0.11)]	Closing Balance [Opening Balance+Interest]
0				10026.61
1	5000	15026.61	1652.9271	16679.5371
2	5000	21679.5371	2384.749081	24064.28618
3	5000	29064.28618	3197.07148	32261.35766
4	5000	37261.35766	4098.749343	41360.107
5	5000	46360.107	5099.61177	51459.71877
6	5000	56459.71877	6210.569065	62670.28784
7	5000	67670.28784	7443.731662	75114.0195
8	5000	80114.0195	8812.542145	88926.56165
9	5000	93926.56165	10331.92178	104258.4834
10	5000	109258.4834	12018.43318	121276.9166
11	5000	126276.9166	13890.46083	140167.3774
12	5000	145167.3774	15968.41152	161135.7889
13	5000	166135.7889	18274.93678	184410.7257
14	5000	189410.7257	20835.17983	210245.9056
15	5000	215245.9056	23677.04961	238922.9552

15 Years

2.

a.

Year	Cash Flow	Discounting Factor [1/{1.1^year}]	PV of Cash Flows [Cash Flow*Discounting Factor]
1	150	0.909090909	136.3636364
2	150	0.826446281	123.9669421
3	150	0.751314801	112.6972201
4	250	0.683013455	170.7533638
5	300	0.620921323	186.2763969
6	550	0.56447393	310.4606615
		Sum of PVs =	1040.518221

Present Value = $1040.518

b.

Year	Cash Flow	Compouning Factor [1.1^{6-year}]	FV of Cash Flows [Cash Flow*Discounting Factor]
1	150	1.61051	241.5765
2	150	1.4641	219.615
3	150	1.331	199.65
4	250	1.21	302.5
5	300	1.1	330
6	550	1	550
		Sum of PVs =	1843.3415

Future Value = $1843.3415

jeff jeffy answered 1 year ago

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