Written Work 7: Annuity (50)

1. At the end of each quarter, a company placed $1,500 in a sinking fund. The fund was invested at
7% compounded quarterly. (a) What will be the final value at the end of five years? (b) What will be
the total interest?

2. At the end of each month during a three - year period, a hospital business manager invested one-
sixth of his monthly bonus of $900. How much will the amount be four years after the last
investment is made if the interest rate is 15% compounded monthly?

3. Carol Shaw, 21 and a college graduate, invested $500 in her IRA account which earns an interest
of 8% compounded quarterly. She plans to invest $500 per quarter continuously for 20 years for a
total of 20 x 4 = 80 quarterly payments. How much will be in her JRA account after she makes her
last quarterly investment?

4. A man wishes to withdraw $350 at the end of every 6 months for 10 years. If the money earns
interest at 11% compounded semiannually, how much must he deposit now?

5. K.G. Griffin purchased a refrigerator and made down payment of $450. She agreed to pay $30 per
month thereafter for one year. If the interest was at 7% compounded monthly, what was the cash
price of the refrigerator?

6. Fred Johnson wants to buy a television set. Store A offered him a payment plan of $70 down
payment and $50 per quarter thereafter for six payments. Store B offered a payment plan of $80
down payment and $25 per quarter thereafter for 12 payments. Which store offered him a better
plan? Why? Assume that the interest rate charged by both stores is 8% compounded quarterly.

7. Bill Sanders bought a truck for $12,500. He made a down payment of $500 and agreed to pay the
balance in 24 equal monthly payments. If the interest charged was 8% compounded monthly, how
much should Sander pay each month?

8. Doris Hicks bought a machine for $560. She paid $50 down payment and agreed to pay the
balance plus interest at 6% compounded quarterly in equal quarterly payments for 3 years. What is
the quarterly payment?

9. A store manager plans to exchange his old car at the end of 4 years for a newer one worth
$15,000. The trade — in value of the old car at that time is estimated to be $400. If the money can
be invested at 12% compounded quarterly, how much must the manager invest at the end of each
quarter in order to make exchange?

10. Ed Merrick wishes to provide a college education fund for his daughter who is now 8 years old. If
the fund can earn 6% interest compounded semiannually and is to be used when she reaches 18
years of age, what must be the size of each semiannual payment/deposit in order to provide a fund
of $10,000? Assume that Merrick wishes to make the first deposit six months from now and the last
deposit on his daughter’s 18th birthday.