B use your finding in part a to discuss the effect of

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Unformatted text preview: s? b. If you can afford to deposit only $600 per year into the account, how much will you have accumulated by the end of the 42nd year? LG6 LG3 4–39 4–40 Accumulating a growing future sum A retirement home at Deer Trail Estates now costs $85,000. Inflation is expected to cause this price to increase at 6% per year over the 20 years before C. L. Donovan retires. How large an equal annual end-of-year deposit must be made each year into an account paying an annual interest rate of 10% for Donovan to have the cash to purchase a home at retirement? LG6 4–41 Deposits to create a perpetuity You have decided to endow your favorite university with a scholarship. It is expected to cost $6,000 per year to attend the university into perpetuity. You expect to give the university the endowment in CHAPTER 4 Time Value of Money 183 10 years and will accumulate it by making annual (end-of-year) deposits into an account. The rate of interest is expected to be 10% for all future time periods. a. How large must the endowment be? b. How much must you depo...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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