Problems

(a) $5,000 at the end of each year for six years

at 6% compounded annually.
(b) $9,000 at the end of each year for nine
years at 7.25 % compounded annually.
(c) $12,000 at the end of each year for 25
years at 8% compounded annually.
(d) $6,000 at the end of each year for 10 years
at 9.75% compounded annually.
What equal annual series of payments must be
paid into a sinking fund in order to accumulate
the following amounts?

(a) $15,000 in 13 years at 5% compounded

annually.
(b) $20,000 in eight years at 6 % compounded annually.
(c) $5,000 in 25 years at 8% compounded
annually.
(d) $4,000 in eight years at 6.85 % compounded
annually.
Part of the income that a machine generates is
put into a sinking fund to pay for replacement
of the machine when it wears out. If $3,000 is
deposited annually at 6 % interest compounded annually, how many years must the machine
be kept before a new machine costing $35,000
can be purchased?

(c) $8,000 in three years at 11% interest compounded annually.

(d) $25,000 in 20 years at 6 % interest compounded annually.

2.31 You have borrowed $20,000 at an interest

rate of 10% compounded annually. Equal
payments will be made over a three-year
period, with each payment made at the end of
the corresponding year. What is the amount of
the annual payment? What is the interest
payment for the second year?
2.32 What is the present worth of the following
series of payments?
(a) $5,000 at the end of each year for
years at 6% compounded annually.
(b) $7,000 at the end of each year for 10
at 9% compounded annually.
(c) $1,500 at the end of each year for six
at 7.25 % compounded annually.
(d) $9,000 at the end of each year for 30
at 8.75 % compounded annually.

eight
years
years
years

2.33 From the interest tables in Appendix B,

determine the value of the following factors by
interpolation, and compare the results with
those obtained from evaluating the A/P and
P/A interest formulas:

A no-load (commission-free) mutual fund has

grown at a rate of 7% compounded annually
since its beginning. If it is anticipated that it
will continue to grow at this rate, how much
must be invested every year so that $10,000
will be accumulated at the end of five years?

(a) The capital-recovery factor for 36 periods

at 6.25 % compound interest.
(b) The equal-payment-series present-worth
factor for 125 periods at 9.25 % compound
interest.

You open a bank account, making a deposit of

$500 now and deposits of $1000 every 2
years. What is the total balance at the end of 10
years from now if your deposits earn 10% interest compounded annually?

2.34 If $400 is deposited in a savings account

2.30 What equal-annual-payment series is required in

order to repay the following present amounts?
(a) $15,000 in five years at 8% interest compounded annually.
(b) $3,500 in four years at 9.5 % interest compounded annually.

at the beginning of each year for 15 years and

the account earns 9% interest compounded
annually. What will be the balance on the
account the end of the 15 years (F)?

Linear Gradient Series

2.35 Kim deposits her annual bonus into a savings

account that pays 8% interest compounded
annually. The size of the bonus increases by
$2,000 each year, and the initial bonus
amount is $5,000. Determine how much will