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Series of Compound Interest Techniques

The following are several situations involving compoundinterest.

Required:

Using the appropriate table, solve each of the following:

(Click here to access the time value of money tables to use withthis problem.)

1.Hope Dearborn invests $40,000 on January 1, 2016, in a savingsaccount that earns interest of 8% compounded semiannually. Whatwill be the amount in the fund on December 31, 2021?

Round your answer to two decimal places.

$

2. Ben Johnson receives a bonus of $5,000 each year on December31. Beginning on December 31, 2016, he deposits his bonus everyyear in a savings account that earns interest of 12% compoundedannually. What will be the amount in the fund on December 31, 2020,after he deposits his bonus received on that date?

Round your answer to two decimal places.

$

3. Ron Sewert owes $30,000 on a non-interest-bearing note dueJanuary 1, 2026. He offers to pay the amount on January 1, 2016,provided that it is discounted at 10% on a compound annual discountbasis. What would he have to pay on January 1, 2016, under thisassumption?

Round your answer to two decimal places.

$

4. June Stickney purchased an annuity on January 1, 2016, which,at a 12% annual rate, would yield $6,000 each June 30 and December31 for the next 6 years. What was the cost of the annuity toStickney?

Round your answer to two decimal places.

$

5. Five equal annual contributions are to be made to a fund,with the first deposit on December 31, 2016. Determine the equalcontributions that, if invested at 10% compounded annually, willproduce a fund of $30,000 on December 31, 2021.

Round your answer to two decimal places.

$

6. Beginning on December 31, 2017, 6 equal annual withdrawalsare to be made. Determine the equal annual withdrawals if $11,000is invested at 10% interest compounded annually on December 31,2016.

Round your answer to two decimal places.

$

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Elin Hessel
Elin HesselLv2
28 Sep 2019

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Related questions

2. A bond issue with a face amount of $400,000 bears interest atthe rate of 7%. The current market rate of interest is 9%. Thesebonds will sell at a price that is:
More than $400,000.
Equal to $400,000.
Less than $400,000.
The answer cannot be determined from the information provided.

3. On January 1, 2016, Solo Inc. issued 1,100 of its 6%, $1,000bonds at 99. Interest is payable semiannually on January 1 and July1. The bonds mature on January 1, 2026. Solo paid $51,000 in bondissue costs. Solo uses straight-line amortization. The amount ofinterest expense for the year is:
$67,100
$72,200
$73,300
$66,000

4. On January 1, 2016, an investor paid $298,000 for bonds witha face amount of $330,000. The stated rate of interest is 11% whilethe current market rate of interest is 13%. Using the effectiveinterest method, how much interest income is recognized by theinvestor in 2016 (assume annual interest payments andamortization)?
$36,300.
$32,780.
$42,900.
$38,740.

5. On January 31, 2016, B Corp. issued $750,000 face value, 10%bonds for $750,000 cash. The bonds are dated December 31, 2015, andmature on December 31, 2025. Interest will be paid semiannually onJune 30 and December 31. What amount of accrued interest payableshould B report in its September 30, 2016, balance sheet? (Do notround intermediate calculations.)
$18,750.
$37,500.
$56,250.
$50,000.

6. Auerbach Inc. issued 7% bonds on October 1, 2016. The bondshave a maturity date of September 30, 2026 and a face value of $325million. The bonds pay interest each March 31 and September 30,beginning March 31, 2017. The effective interest rate establishedby the market was 9%.

How much cash interest does Auerbach pay on March 31, 2017?(Answer should be in million rounded to two decimal places.)
$22.75 million
$14.63 million
$11.38 million
$29.25 million

n January 1, 2016, Learned, Inc., issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2035 Calculate the proceeds (issue price) of Learned, Inc.'s, bonds on January 1, 2016, assuming that the bonds were sold to provide a market rate of return to the investor. (Round PV factor to 4 decimal places.)

Culver Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,971,900 on January 1, 2017. Culver expected to complete the building by December 31, 2017. Culver has the following debt obligations outstanding during the construction period. Construction loan-10% interest, payable semiannually, issued December 31, 2016 $1,999,900 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2018 1,611,800 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2021 1,006,500 Assume that Culver completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,212,300, and the weighted-average amount of accumulated expenditures was $3,779,200. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.) Avoidable Interest $ Compute the depreciation expense for the year ended December 31, 2018. Culver elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $302,700. (Round answer to 0 decimal places, e.g. 5,275.) Depreciation Expense $

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