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You need $23,956 at the end of nine years, and your only investment outlet is a 7 percent long-term certificate of deposit (compounded annually).

You need $23,956 at the end of nine years, and your only investment outlet is a 7 percent long-term certificate
of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning
of the first year.

a. What single payment could be made at the beginning of the first year to achieve this objective?
b. What amount could you pay at the end of each year annually for nine years to achieve this same objective?


Solution
Problem 9-30
Instructions

Use the MS Excel PV function in part a and enter a formula in part b to solve the requirements of this problem.

Information
Future value needed $23,956
Years 9
Annual investment yield 7%

a. What single payment could be made at the beginning of the first year to achieve this objective?

Single payment (present value) _____________________?

b. What amount could you pay at the end of each year annually for nine years to achieve this same objective?

Payments at end of each year (annuity) ____________?
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