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What annual interest rate is required to accumulate
Course:- Finance Basics
Reference No.:- EM13298346




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Consider the surgery centers' goal of having @200,000 available in five years to buy a new Patient billing system.
a. What lump sum amount must be invested today in a CD paying 10 percent annual interest to accumulate the needed $200,000?
b. What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

Now consider a second alternative for accumulating funds to buy the new billing system.In lieu of lump sum investment, assume that five annual payments of $32,000 are made at the end of each year

a.What type of annuity is this?

b.What is the present value of this annuity if the payments are invested in n account that pays 10 percent interest annually? 10 percent compounded annually?

c. What is the future value of this annuity if the payments are invested in an account that pays 10 percebt interest annually? 10 percent compounded semi annually?

d. What annual interest rate is required to accumulate the $200,000 needed to make the purchase , assuming a $32,000 annual payment?

e.What size annual payment is needed to accumulate $200,000 under annual compounding at a 10 percent interest rate?

f. Suppose the payments are only $16,000 each, but they are made every six ,months, starting six months from now.What will the future value be if the 10 payments were invested at 10 percent annual interest? If invested at Banksouthat 10 compounded semi annually?




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