Question & Answer: 10. A municipal agency, planning for future budgets, deposits $10,000 into an account paying 5% interest compoun…..

10. A municipal agency, planning for future budgets, deposits $10,000 into an account paying 5% interest compounded annually for first two years, and then 6% compounded annually for the next two years. The agency will make four annual withdrawals from the account, with the size of the withdrawal increasing by $1,000 per year, each year. The first withdrawal will occur one year after the deposit. What will be the size of the last withdrawal, which will deplete the balance in the account? a. 1,408.10 b. $4,408.10 c. $ 5,292.62 d. $11,143.55 11. A practitioner invests $10,000 into a venture that would return $500(0.80)시 at the end of year k for k 20. The interest rate is 10% compounded annually. Which of the following is true about the I, , ventures expected cash flow? Geometric gradient with g =-20% Geometric gradient with g-20% Geometric gradient with g = 80% Uniform gradient with G = $500 a. b. c. d.

10. A municipal agency, planning for future budgets, deposits $10,000 into an account paying 5% interest compounded annually for first two years, and then 6% compounded annually for the next two years. The agency will make four annual withdrawals from the account, with the size of the withdrawal increasing by $1,000 per year, each year. The first withdrawal will occur one year after the deposit. What will be the size of the last withdrawal, which will deplete the balance in the account? a. 1,408.10 b. $4,408.10 c. $ 5,292.62 d. $11,143.55 11. A practitioner invests $10,000 into a venture that would return $500(0.80)시 at the end of year k for k 20. The interest rate is 10% compounded annually. Which of the following is true about the I, , venture’s expected cash flow? Geometric gradient with g =-20% Geometric gradient with g-20% Geometric gradient with g = 80% Uniform gradient with G = $500 a. b. c. d.

Expert Answer

 

Year Deposit Interest Withdrawal Amount in hand
o 10000 10000
1 0 500 1408.1 9091.90
2 0 454.6 2408.1 7138.40
3 0 428.3 3408.1 4158.60
4 0 249.5 4408.1 0
Year Interest rate
1 10000*5% 500
2 9091.9*5% 454.6
3 7138.4*6% 428.3
4 4158.60*6% 249.5
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