Problem 6-2

Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns.

Click here to view factor tables What is the amount of the payments that Newman Winslow must make at the end of each of 8 years to accumulate a fund of $95,800 by the end of the 8th year, if the fund earns 8% interest, compounded annually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Payment at the end of each year $

Tony Hitchcock is 42 years old today and he wishes to accumulate $523,000 by his 66th birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his 42nd through his 65th birthdays. What annual deposit must Tony make if the fund will earn 11% interest compounded annually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Annual deposit $

Maria Ross has $18,800 to invest today at 10% to pay a debt of $59,002. How many years will it take her to accumulate enough to liquidate the debt? (Round answer to 0 decimal places, e.g. 45.)

years Sally Houston has a $26,500 debt that she wishes to repay 5 years from today; she has $16,454 that she intends to invest for the 5 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt? (Round answer to 0 decimal places, e.g. 7%.)

Rate of interest

%