Ch.10_Solution_Manual_Ed.1_v14_

Ch.10_Solution_Manual_Ed.1_v14_ - Exercises 10.1 Identify...

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Unformatted text preview: Exercises 10.1 Identify the type of annuity and calculate the number of payments during the term in the following problems: Exercise 10.1, Solution 1: Payments are made at the end of every month and compounding period (quarterly) = payment period (quarterly). Therefore, this is an ordinary simple annuity. Payment interval is 3 months. In one year, Ronda would have to make 3 12 = 4 payments Therefore, number of payments in 5 years, 9 months (5.75 years) = 4 5.75 = 23 payments. Exercise 10.1, Solution 3: Payments are made at the end of every month and compounding period (semi-annually) payment period (monthly). Therefore, this is an ordinary general annuity. Payment interval is one month. In one year, Mike would receive 1 12 = 12 payments Therefore, number of payments in 15 years = 12 15 = 180 payments. Exercise 10.1, Solution 5: Payments are made at the beginning of every month and compounding period (quarterly) = payment period (quarterly). Therefore, this is a simple annuity due. Payment interval is 3 months. In one year, Mary would have to make 3 12 = 4 payments Therefore, number of payments in 2 years = 4 2 = 8 payments. Exercise 10.1, Solution 7: Payments are made at the beginning of every month and compounding period (annually) payment period (monthly). Therefore, this is a general annuity due. Payment interval is one month. Therefore, number of payments in 3 years, 5 months (3 12 + 5 = 41 months) is 1 41 = 41 payments. Exercise 10.1, Solution 9: This forms two different annuities. 1st annuity for 6 years with beginning-of-month payments (PMT = $280) Payment period (monthly) compounding period (annually) Therefore, it is a general annuity due. Payment interval is one month. Therefore, number of payments in 6 years (6 12 = 72 months) is 1 72 = 72 payments. 2nd annuity for 2 years with month-end payments (PMT = $580) Payment period (monthly) compounding period (semi-annually) Therefore, it is an ordinary general annuity. Payment interval is one month. Therefore, number of payments in 2 years (2 12 = 24 months) is 1 24 = 24 payments. 2 Exercises 10.2 Exercise 10.2, Solution 1: a. This is an ordinary simple annuity because: Payments are made at the end of each payment period (monthly) Compounding period (monthly) = payment period (monthly) n = 12 payments/year 5 years = 60 monthly payments j = 6% = 0.06, m = 12 m j i = = 12 06 . = 0.005 per month - + = i i PMT FV n 1 ) 1 ( - + = 005 . 1 ) 005 . 1 ( 50 60 = $3488.501525 = $3488.50 N I/Y P/Y C/Y PV PMT FV 60 6 12 12 50 ? From the calculator computations shown, we get the FV = 3488.501525 Therefore, the accumulated value of her money at the end of the period in her savings account is $3488.50....
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This note was uploaded on 04/04/2012 for the course MATH 1052 taught by Professor Kit during the Winter '12 term at Fanshawe.

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Ch.10_Solution_Manual_Ed.1_v14_ - Exercises 10.1 Identify...

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