Wiseman Video plans to make four annual deposits of $2,000 each to a special building fund. The fund’s assets will be invested in mortgage instruments expected to pay interest at 12% on the fund’s balance. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Using the appropriate annuity table, determine how much will be accumulated in the fund on December 31, 2019, under each of the following situations.
1. The first deposit is made on December 31, 2016, and interest is compounded annually.
Table or calculator function: FVA of $1
Payment: $2,000
n = 4
i = 12%
Fund balance 12/31/2019: $9,559
2. The first deposit is made on December 31, 2015, and interest is compounded annually.
Table or calculator function: FVAD of $1
Payment: $2,000
n = 4
i = 12%
Fund balance 12/31/2019: $10,706
3. The first deposit is made on December 31, 2015, and interest is compounded quarterly.
Using the FV of $1 chart, calculate the fund balance:
Deposit Date i = n = Deposit Fund Balance 12/31/2019
12/31/2015 3% 16 $2,000 $3,209
12/31/2016 3% 12 2,000 2,852
12/31/2017 3% 8 2,000 2,534
12/31/2018 3% 4 2,000 2,251
$10,846
4. The first deposit is made on December 31, 2015, interest is compounded annually, and interest earned is withdrawn at the end of each year.
Deposit Amount No. of Payments Interest left in Fund Fund Balance 12/31/2019
$2,000 $8,000
