For each of the following increasing annuities specify i n R

For each of the following increasing annuities, specify i, n, R, and F. (a) If at the end of each month, $40 is deposited into a savings account paying 6% interest compounded monthly, the balance after 10 years will be $6555.17. (b) Mr. Smith is saving to buy a $60,000 yacht in the year 2017. Since 2007, he has been depositing $2469.40 at the end of each half-year into a fund paying 4% interest compounded semiannually. i = (Type an integer or a decimal.) n = (Simplify your answer.) R = $ F =$ (b) i = (Type an integer or a decimal.) n = (Simplify your answer.) R = $ F = $

Solution

(a)

i= interest rate =6%/(no of payment in a year)=6%/12=0.005

n= no of payment= 10*12=120

R=Cash flow per period= $40

F= Future value= $ 6555.17

(b)

i= interest rate =6%/(no of payment in a year)=6%/2=3%=0.03

n= no of payment= 10*2=20

R=Cash flow per period= $2,469.40

F= Future value= $ 60,000