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Fiesta28 [93]
2 years ago
3

To save for her newborn son ’s college education, Lea Wilson will invest $1,000 at the end of each year for the next 20 years. T

he interest rate is 10%. What is the future value?
Business
1 answer:
nirvana33 [79]2 years ago
3 0

Answer:

$63002.50

Explanation:

The future value of an annuity is how much a stream of A dollars invested each year at 'i' interest rate will be worth in 'n' years.

The formula is FV = A {[(1 + i)ⁿ - 1] / i} (1 + i).

FV = Future Value = ?

A = A dollars invested each year = $1000

i = Interest Rate = 10%

n = Number of years = 20

FV = 1000 {[(1 + .1)²⁰ - 1] / 0.1} (1 + 0.1)

FV = 1000 {[(1.1)²⁰ - 1] / 0.1} (1.1)

FV = 1000 {[6.727490 - 1] / 0.1} (1.1)

FV = 1000 {[5.727490] / 0.1} (1.1)

FV = 1000 {57.274999} (1.1)

FV = 57274.90 (1.1)

FV = 63002.50

FV = $63003

After 20 years Lea Wilson will get $63003 at 10% interest rate when invested $1000 annually.

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Answer:

0.00573

Explanation:

Cost of the bond today = $99.43

Value of bond at end of year = $100

Difference = $100 - $99.43 = $0.57

This $0.57 represents earnings on such bond value, that is yield on the bond.

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This value represents the discount rate of 1 year on $100 that is for which present value $99.43.

Final Answer

0.00573

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