A saver wants - A saver wants $100,000 after 10 years and...

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A saver wants $100,000 after 10 years and believes that it is possible to earn an annual rate of 8% on invested funds. a) What amount must be invested each year to accumulate $100,000 if (1) the payments are made at the beginning of each year or (2) if they are made at the end of the year? (1) at the beginning of each year – annuity due $100,000 = (1.08 10 ) + (1.08 9 ) + (1.08 8 ) + (1.08 7 ) + (1.08 6 ) + (1.08 5 ) + (1.08 4 ) + (1.08 3 ) + (1.08 2 ) + (1.08 1 ) 2.159 + 2.0 + 1.851 + 1.714 + 1.587 + 1.47 + 1.361 + 1.26 + 1.166 + 1.08 = 15.648 $100,000 / 15.648 = $6,391 must be invested each year (2) at the end of the year – ordinary $100,000 = x (14.487)
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This note was uploaded on 04/01/2012 for the course FINC 354 taught by Professor Gibbons-cobb during the Spring '12 term at Columbia College.

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