It is now January 1, 2006, and you will need $1,000 on January 1, 2010, in 4 years. Your bank

It is now January 1, 2006, and you will need $1,000 on January 1, 2010, in 4 years. Your bank

compounds interest at an 8 percent annual rate.

a. How much must you deposit today to have a balance of $1,000 on January 1, 2010?

(2 marks)

b. If you want to make 4 equal payments on each January 1 from 2007 through to 2010 to

accumulate the $1,000, how large must each payment be? (payments begin a year from

today). (5 marks)

c. If you have only $750 on January 1, 2007, what interest rate, compounded annually for

3 years, must you earn to have $1,000 on January 1, 2010? (5 marks)

d. Your father offers to give you $400 on January 1, 2007. You will then make 6 additional

equal payments each 6 months from July 2007 through January 2010. If your bank pays 8

percent, compounded semiannually, how large must each payment be for you to end up

with $1,000 on January 1, 2010? (8 marks)


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