   Chapter 12.I, Problem 24RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Hi-Tech Hardware has been in business for a few years and is doing well. The owner has decided to save for a future expansion to a second location. He invests $1,000 at the end of every month at 12% interest compounded monthly.a. How much will be available for the second store after 2 1 2 years?b. How much would be in the account if the owner saved for 5 years?c. How much would be in the account after 5 years if it had been an annuity due? (a) To determine To calculate: The future value of ordinary annuities where Hi Tech Hardware invests$1,000 at the end of every month for 2.5 years at nominal rate of return of 12% and interest is compounded monthly.

Explanation

Given Information:

Monthly deposit is $1,000, frequency of payment is 1 month, time duration is 2.5 years, nominal rate of return is 12% and interest is compounded monthly. Formula used: The formula to compute the future value of ordinary annuity is, FV=Pmt×(1+i)n1i Where, FV is the future value, Pmt is the Annuity payment, i is the interest rate per period, n is the number of periods. Calculation: Consider that monthly deposit is$1,000, frequency of payment is 1 month, time duration is 2.5 years, nominal rate of return is 12% and interest is compounded monthly.

The rate period is 1%(12%÷12 period per year).

The number of periods is 30(2.5 years×12 period per year).

Substitute 30 for number of periods, 0

(b)

To determine

To calculate: The future value of ordinary annuities where Hi Tech Hardware invests $1,000 at the end of every month for 5 years at nominal rate of return is 12% and interest is compounded monthly. (c) To determine To calculate: The future value of annuities due where Hi Tech Hardware invests$1,000 at the end of every month for 5 years at nominal rate of return of 12% and interest is compounded monthly.

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