Question #138145

Angeline wishes to make six annual deposits in the amounts of $1,000, $2,000, $3,000,

$4,000, $5,000 and $6,000, in that order, into a fund that pays interest at rate of 5% per

annum. Determine the value of amount today if

i) the interest is compounded annually

ii) the interest is compounded quarterly.

$4,000, $5,000 and $6,000, in that order, into a fund that pays interest at rate of 5% per

annum. Determine the value of amount today if

i) the interest is compounded annually

ii) the interest is compounded quarterly.

Expert's answer

**solution**

Part i)

Compounding per annum

Rate "r=0.05"

Present value "PV = \\sum p_i(1+r)^{-i}"

"= 17044.74"

*answer: the present value is $ 17,044.74*

Part ii)

Compounding quarterly

"PV = \\sum p_i(1+\\frac{r}{4})^{-i*4}"

"=26116.03"

*answer: the present value is $ 26,116.03*

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