Question 1

Use the tables in the handbook. Pam Reed has decided to invest $500 quarterly for five years in an ordinary annuity at 12%. As her financial advisor, calculate for Pam the total cash value of the annuity at the end of year 5.

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Question 2

Pete Rool made deposits of $6,000 at the end of each quarter to Rote Bank, which pays 8% interest compounded quarterly. After three years, Pete made no more deposits. What would be the balance in the account two years after the last deposit?

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Question 3

Al Wright puts $2,000 in a bank at the end of every six months. The bank pays 8% compounded semiannually. Assuming Al does this for four years, what is the total interest he will receive?

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Question 4

Use the tables in the handbook. Given an annuity due of $5,000, 12% semiannually for three years, what is the value of the investment at the end of three years?

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Question 5

Alice Kate puts $2,500 in a bank at the end of every six months. The bank pays 12% compounded semiannually. Assuming Alice does this for four years, what is the total interest she will receive?

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Question 6

Use the tables in the handbook. What must you invest today in order to receive an annuity of $6,000 for four years semiannually at 12%? All withdrawals will be made at the end of each period.

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Question 7

How much will the Apple Corporation have to set aside each period to have $40,000 eight years from now? Assume money is at 12% compounded semiannually.

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Question 8

Use the tables in the handbook. Shelley Sands decided to retire to Hawaii in four years. What amount should Shelley invest today so that she will be able to withdraw $20,000 at the end of each year for 30 years after she retires? Assume she can invest money at 7% compounded annually.

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Question 9

Use the tables in the handbook. Alvin Roz puts $2,000 in a bond at the end of every six months. The bank pays 12%, compounded semiannually. Assuming Alvin does this for three years; calculate the amount of total interest he will receive.

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Question 10

Use the tables in the handbook. Jackie Bell invests $5,000 at the end of each year for 15 years. The rate of interest Jackie gets is 8% annually. What is the final value of Jackie's investment in this ordinary annuity?

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Question 11

Use the tables in the handbook. What is the value of an investment after three years on an ordinary annuity of $5,000 made semiannually at 12%?

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Question 12

Alice Hall made deposits of $300 semiannually to Rey Bank, which pays 8% interest compounded semiannually. After five years Alice made no more deposits. What would be the balance in the account four years from the last deposit?

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Question 13

Use the tables in the handbook. Bob Fraser promised to pay his son $400 semiannually for six years. If Bob can invest his money at 12% in an ordinary annuity, how much must he invest today to be able to pay his son $400 semiannually for six years?

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Question 14

Use the tables in the handbook. At the beginning of each year, Dick Raven invests $700 semiannually at 8% for eight years. What will be the cash value of this annuity due at the end of year 8?

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Question 15

Use the tables in the handbook. A customer of Mary Co. promised to make semiannual payments of $700 for six years. Assuming the money is invested by Mary Co. at 8%, compounded semiannually, what is the value today of these payments?

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Question 16

What must John Sullivan invest today to receive an annuity of $6,000 for three years semiannually at a 10% annual rate? All withdrawals will be made at the end of each period.

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Question 17

Jim Hunter decides to retire to Florida in 10 years. What amount should Jim invest today so that he will be able to withdraw $25,000 at the end of each year for 30 years after he retires? Assume he can invest money at 9% interest compounded annually.

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Question 18

How much will the Van Company have to set aside each period to have $60,000 twelve years from now? Assume money is at 12% compounded semiannually.

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Question 19

Rachel deposits $2,000 semiannually for three years. What is the value of her investment at the end of three years assuming she can earn 6% interest?

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Question 20

Lisa Schermer wants to receive $5,000 a year for 12 years. How much must she invest today at 12% interest compounded annually?

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Quiz 13: Annuities and Sinking Funds