a. A friend of yours, Grace, wants to purchase a house in five years. To save for the house, Grace decides to deposit $122,000 in a savings account on January 1 of this year. The savings account will earn 7 percent annually. Any interest earned will be added to the fund at year-end (rather than withdrawn). b. At the end of each year, a different friend, Claire, plans to deposit $9,500 in a savings account. The account will earn 10 percent annual interest, which will be added to the fund balance at year-end. Claire will make her first deposit at the end of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. In (a), how much will be available at the end of five years? What is the total interest earned over the five years? 2. In (b), what will be the balance in the savings account at the end of the 8th year (i.e., after 8 deposits)? What is the interest earned on the 8 deposits? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 In (a), how much will be available at the end of five years? What is the total interest earned over the five years? Note: Round your answers to nearest whole dollar. Amount available $ 171,166 Total interest earned $ 49,166 < Required 1 Required 2 >
a. A friend of yours, Grace, wants to purchase a house in five years. To save for the house, Grace decides to deposit $122,000 in a savings account on January 1 of this year. The savings account will earn 7 percent annually. Any interest earned will be added to the fund at year-end (rather than withdrawn). b. At the end of each year, a different friend, Claire, plans to deposit $9,500 in a savings account. The account will earn 10 percent annual interest, which will be added to the fund balance at year-end. Claire will make her first deposit at the end of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. In (a), how much will be available at the end of five years? What is the total interest earned over the five years? 2. In (b), what will be the balance in the savings account at the end of the 8th year (i.e., after 8 deposits)? What is the interest earned on the 8 deposits? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 In (a), how much will be available at the end of five years? What is the total interest earned over the five years? Note: Round your answers to nearest whole dollar. Amount available $ 171,166 Total interest earned $ 49,166 < Required 1 Required 2 >
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 14P
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Transcribed Image Text:a. A friend of yours, Grace, wants to purchase a house in five years. To save for the house, Grace decides to deposit $122,000 in a
savings account on January 1 of this year. The savings account will earn 7 percent annually. Any interest earned will be added to
the fund at year-end (rather than withdrawn).
b. At the end of each year, a different friend, Claire, plans to deposit $9,500 in a savings account. The account will earn 10 percent
annual interest, which will be added to the fund balance at year-end. Claire will make her first deposit at the end of this year. (FV
of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Required:
1. In (a), how much will be available at the end of five years? What is the total interest earned over the five years?
2. In (b), what will be the balance in the savings account at the end of the 8th year (i.e., after 8 deposits)? What is the interest earned
on the 8 deposits?
> Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
In (a), how much will be available at the end of five years? What is the total interest earned over the five years?
Note: Round your answers to nearest whole dollar.
Amount available
$
171,166
Total interest earned
$
49,166
< Required 1
Required 2 >
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