Reference no: EM132622410

Questions -

Q1) You need to accumulate $10,000 and in order to do so, you plan to make deposits of $1250 per year in a bank account which pays 12 percent annual interest with the first payment being made a year from today. The last payment may be less than $1250 since it will be the balancing amount required to give you a total of $10,000. How long will it take to reach you target of $10,000 and what will be the amount of your last deposit?

a. 5 years and the last deposit will be $1,574

b. 6 years and the last deposit will be $1,232

c. 6 years and the last deposit will be $1,106

d. 7 years and the last deposit will be $991

e. 8 years and the last deposit will be $1,250

Q2) Bill plans to fund his individual retirement account with the maximum contribution of $4000 at the end of each year for the next 20 years. If Bill can earn 6% on his contributions, how much (to the nearest dollar) will he have at the end of the 20th year?

Q3) Which of following statement is true about annulities

a. An annuity due is an equal amount of money paid or received at the beginning of each period

b. An ordinary annuity is an annuity for the which the first cash flow occurs beyond the end of the first period

c. An annuity due is an equal amount of money paid or received at the beginning of each period, that increase by an equal amount in each period

d. An ordinary annuity is an equal amount of money paid or received at the end of each period that increases by an equal amount each period

e. An ordinary annuity is an equal amount of money paid or received at the beginning of each period.