Question 16 If a merchant deposits 1500 annually at the end

Question 16

If a merchant deposits $1,500 annually at the end of each tax year in an IRA account paying interest at the rate of 10%/year compounded annually, how much will she have in her account at the end of 25 years? Round your answer to two decimal places.

A.

$16,252.06

B.

$147,520.59

C.

$5,250.00

D.

$34,663.65

Question 17

Find the present value of an ordinary annuity of $600 payments each made quarterly over 5 years and earning interest at 4% per year compounded quarterly.

A.

$8,154.20

B.

$2,671.09

C.

$10,827.33

D.

$56,916.87

Question 18

Juan invested $24,000 in a mutual fund 5 years ago. Today his investment is worth $34,616. Find the effective annual rate of return on his investment over the 5-year period.

A.

10.3%/year

B.

8%/year

C.

83%/year

D.

8.3%/year

Question 19

Find the amount of an ordinary annuity for 5 years of quarterly payments of $2,200 that earn interest at 4% per year compounded quarterly.

A.

$11,222.21

B.

$65,511.77

C.

$48,441.81

D.

$2,684.42

Question 20

Find the present value of the ordinary annuity. Please round the answer to the nearest cent.$2,000 per semiannual period for 7 yr at 12%/year compounded semiannually

A.

P = $18,589.97

B.

P = $17,913.54

C.

P = $20,003.52

D.

P = $13,147.80

E.

P = $9,629.07

	A.	$16,252.06
	B.	$147,520.59
	C.	$5,250.00
	D.	$34,663.65

Solution

16.

For an annuity immediate,

A = P[(1+i)^n - 1]/i

Here, n = 25, the number of payments.

Thus,

A = 1500*((1+0.1)^25-1)/0.10 = 147520.59 [ANSWER, OPTION B]

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