Ordinary Annuities: Future Value and Present Value

Oct 2017
3
0
Manitoba
Need help with 2 problems.


1.)Charlene has made contributions of 3,400 dollars to her RRSP at the end of every half year for the past seven years. The plan has earned 9% compounded semiannually. She has just moved the funds to another plan earning 7.5% compounded quarterly, and will now contribute $2400 at the end of every three months.

What total amount will she have in the plan five years from now? (Do not round intermediate calculations and round your final answer to 2 decimal places.)


2.)What price will a finance company pay for a conditional sale contract requiring 12 monthly payments of $176.00, if the company requires a rate of return of 21% compounded semiannually? The first payment is due one month from now. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
 
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Feb 2015
2,255
510
Ottawa Ontario
1.)Charlene has made contributions of 3,400 dollars to her RRSP at the end of every half year for the past seven years. The plan has earned 9% compounded semiannually. She has just moved the funds to another plan earning 7.5% compounded quarterly, and will now contribute $2400 at the end of every three months.

What total amount will she have in the plan five years from now? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Step1: calculate value at end of 7 years
c = 3400
i = .09/2 = .045
n = 7*2 = 14
v = ?
v = c*[(1 + i)^n - 1] / i

Step 2: calculate value of v 5 years later
i = .075/4 = .01875
n = 5*4 = 20
v = v(1 + i)^n

Step3: calculate accumulation during last 5 years
c = 2400
i = as in step2
n = as in step 2
w = ?
w = c*[(1 + i)^n - 1] / i

Total amount = v + w

We'll help you with part2 after you show your
understanding of above; deal??!!
 
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