You want to build a $40,000 shed on your property in 3 years. You find that the bank can offer several options with a rate of 6% compounded quarterly.Your options are the following:Option 1: You make a one time deposit money today as one lump sum into a savings account to gain $40,000. How much would you need to deposit? How much interest do you earn?Option 2: You make a deposit at the end of each quarterly into a savings account to gain $40,000.How much will the deposit be for each quarter?How much interest do you earn?Option 3: You decide that you want to build the shed today and instead of saving the money up, you take out a loan in the amount of the $35,000 which is how much it will cost to make the shed today. How much will the quarterly payment be to pay-off the loan in 3 years? How much interest do you need to pay?

The cost of the shed after 3 years will be $40,000 and if the shed is built today, the cost will be…

Answered: You want to build a $40,000 shed on…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...

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You want to build a $40,000 shed on your property in 3 years. You find that the bank can offer several options with a rate of 6% compounded quarterly.

Your options are the following:

Option 1: You make a one time deposit money today as one lump sum into a savings account to gain $40,000.
1. How much would you need to deposit?
2. How much interest do you earn?
Option 2: You make a deposit at the end of each quarterly into a savings account to gain $40,000.
1. How much will the deposit be for each quarter?
2. How much interest do you earn?
Option 3: You decide that you want to build the shed today and instead of saving the money up, you take out a loan in the amount of the $35,000 which is how much it will cost to make the shed today.
1. How much will the quarterly payment be to pay-off the loan in 3 years?
2. How much interest do you need to pay?

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