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Devon National Bank pays 8% interest compounded weekly (0.154% per week) on savings accounts. The bank has asked your help in preparing a table to show potential customers the number of dollars that will be available at the end of 10-, 20-, 30-, and 40-week periods during which there are weekly deposits of $1, S5, $10, or $50. The following data are available:
Required:
Complete a table similar to the one below. (Note: Round answers to two decimal places.)
Introduction:
Compound interest considers the time value of money. Future value of annuity means the value of annual cash flows along with the compound interest on a specific date.
To complete:
The table that shows future value of depositing various amounts for specified period.
Given:
| Length of Annuity | Future Value of Annuity (where i = 0.1554% per week) |
| 10 weeks | 10.0696 |
| 20 weeks | 20.2953 |
| 30 weeks | 30.6796 |
| 40 weeks | 41.2250 |
Calculations:
Compounded Weekly,
Interest Rate = 0.154%
FV = Future Value
(1a) Annual Cash Flow (f) = $1 No. of periods = 10
FV = (f)(FV of an annuity, 10 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($1)(10.0696)
FV = $10.07
(1b) Annual Cash Flow (f) = $1 No. of periods = 20
FV = (f)(FV of an annuity, 20 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($1)(20.2953)
FV = $20.30
(1c) Annual Cash Flow (f) = $1
No. of periods = 30
FV = (f)(FV of an annuity, 30 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($1)(30.6796)
FV = $30.68
(1d) Annual Cash Flow (f) = $1
No. of periods = 40
FV = (f)(FV of an annuity, 40 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($1)(41.2250)
FV = $41.23
(2a) Annual Cash Flow (f) = $5 No. of periods = 10
FV = (f)(FV of an annuity, 10 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($5)(10.0696)
FV = $50.35
(2b) Annual Cash Flow (f) = $5 No. of periods = 20
FV = (f)(FV of an annuity, 20 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($5)(20.2953)
FV = $101.48
(2c) Annual Cash Flow (f) = $5
No. of periods = 30
FV = (f)(FV of an annuity, 30 periods, 0.154%)
Using the given ‘FV of an annuity table’,
FV = ($5)(30.6796)
FV = $153.398
(2d) Annual Cash Flow (f) = $5
No...
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