Chapter 12.I, Problem 12RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Solve the following exercises by using Table 12-1.

Suntech Distributors, Inc. deposits $5,000 at the *beginning* of each 3-month period for 6 years in an account paying 8% interest compounded quarterly.

a. How much will he in the account at the end of the 6-year period?

b. What is the total amount of interest earned in this account?

**(a)**

To determine

**To calculate:** The value of account at the end of 6 years where regular deposit is

Explanation

**Given Information:**

Regular deposit is

**Formula used:**

Steps for calculating the future value of an annuity due are:

Step 1: First the periods of the annuity of must be calculated.

Step 2: The interest rate per period must be calculated.

Step 3: Use table 12-1 to locate the ordinary annuity table factor that lies on the intersection of the rate-per period column and number-of-periods row.

Step 4: The number 1.00000 must be subtracted from the ordinary annuity table in order to get the annuity due factor.

Step 5: Finally calculate the future value of the annuity due.

The formula to compute the future value of ordinary annuity is,

**Calculation:**

Consider that regular deposit is

As the interest is compounded quarterly. So, the interest rate period is;

The rate period is

**(b)**

To determine

**To calculate:** The amount of total interest where regular deposit is

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