Time Value Of Money Exam Reviewer With Solutions

MIDTERMASSIGNMENTNO. 1Ordinary AnnuityAnnuity DueSuppose you put P250 at the beginning of every month in a savings account that credits interest at the annual rate of 6%, butcompounds it monthly. Find the amount in this account after 25 years. monthlypayment = P250AnnualInterest=6%Ye a rs = 2 5Monthly interest = 6%/12months# of monthly payments = 12months * 25 yearsFVFactorofAnnuityDue= (1+.005)300-1 * (1+0.005)0.005=696.4589FV of P250 monthly payment for 25 years = P250*696.4589= P174,114.73Yo u have decided to put P130 in a savings account at the end of each month. The savings account credits interest monthly, at the annual rate of 6%. How much money is in your account after 6 years? monthlypayment = P130AnnualInterest=6%Ye a rs = 6Monthly interest = 6%/12months# of monthly payments = 12months * 6 yearsFVFactorofOrdinary Annuity = ((1+.005)72) -10.005= 86.4089FV of P130 monthly payment for 6 years = P130*86.4089= P11,233.16Fred Abbott has just opened an IRA in which he plans to deposit P150 at the end of every month. The account will compound interest monthly at the annual rate of 9%. How much money will Fred have after 25 years in this account?monthlypayment = P150AnnualInterest=9%Ye a rs = 2 5Monthly interest = 9%/12months# of monthly payments = 12months *