The following are two independent situations.
1. Houser wishes to accumulate a fund of $40,000 for the purchase of a house and lot. He plans to deposit $4,000 semiannually at the end of each six months. Assuming interest at 14% a year compounded semiannually, how many deposits of $4,000 each will be required and what is the amount of the last deposit?
2. On January 1, 2007 Joan Campbell borrows $20,000 from Susan Rone and agrees to repay this amount in payments of $4,000 a year until the debt is paid in full. Payments are to be of an equal amount and are to include interest at 12% on the unpaid balance of principal at the beginning of each period. Assuming that the first payment is to be made on January 1, 2008, determine the number of payments of $4,000 each to be made and the amount of the final payment.
Using the appropriate tables, solve each of the preceding situations.
- 5 years ago
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