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Now consider a second alternative for accumulating funds to buy the new billing system.In lieu of lump sum investment, assume that five annual payments of $32,000 are made at the end of each year

a.What type of annuity is this?

b.What is the present value of this annuity if the payments are invested in n account that pays 10 percent interest annually? 10 percent compounded annually?

c. What is the future value of this annuity if the payments are invested in an account that pays 10 percebt interest annually? 10 percent compounded semi annually?

d. What annual interest rate is required to accumulate the $200,000 needed to make the purchase , assuming a $32,000 annual payment?

e.What size annual payment is needed to accumulate $200,000 under annual compounding at a 10 percent interest rate?

f. Suppose the payments are only $16,000 each, but they are made every six ,months, starting six months from now.What will the future value be if the 10 payments were invested at 10 percent annual interest? If invested at Banksouthat 10 compounded semi annually?

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M9874311

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