100 is deposited into an account at the end of each 3-year period for 36 years. The accumulated value at the end of 36 years is 4 times the accumulated amount in the account at the end of 12 years. Find the effective annual rate and the accumulated amount at the end of 36 years.

100 is deposited into an account at the end of each 3-year period for 36 years. The accumulated value at the end of 36 years is 4 times the accumulated amount in the account at the end of 12 years. Find the effective annual rate and the accumulated amount at the end of 36 years.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 25P

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

100%

100 is deposited into an account at the end
of each 3-year period for 36 years. The
accumulated value at the end of 36 years is
4 times the accumulated amount in the
account at the end of 12 years. Find the
effective annual rate and the accumulated
amount at the end of 36 years.

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