Exercise 5-17 (Algo) Future value; solving for annuities and single amount (LO5-4, 5-9)
Parents want to accumulate $75,000 to be used for their child's college education. The parents would like to have the
amount available on December 31, 2029. Assume that the funds will accumulate in an account paying 8% interest
compounded annually.
Answer each of the following independent questions.
Required:
1. If they were to deposit a single amount, how much would they have to invest on December 31, 2024?
2. If they were to make five equal deposits on each December 31, beginning on December 31, 2025, what is the
required amount of each deposit?
3. If they were to make five equal deposits on each December 31, beginning on December 31, 2024, what is the
required amount of each deposit?
Note: For all requirements, use tables, Excel, or a financial calculator. Round your final answers to nearest whole
dolar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
1. Amount $ 51,045
2. Annuity
amount $ 18,784
3. Annuity
amount $ 17,393