1. Starting on his 26th birthday, Fred deposits $3000 a year into a savings fund. His last deposit is at the age of 45. Starting 1 year later, he makes annual withdrawals for 20 years. If j_1=10%. throughout, find the size of these annual withdrawals? *
2. A parcel of land valued at $35,000 is sold for $10,000 down. The buyer agrees to pay the balance with interest at j12=12% by paying $600 monthly as long as necessary, the first payment due one year from now. Find the number of $600 payments needed and the size of concluding payment one month after the last $600 payment. *

Answer 1

1) Using Financial Calculator to calculate the FV = Future Value

Input,

• I/Y = 10%
• N=20
• PMT = 3000
• PV = 0

And

Press CPT and then FV

FV = Future Value = 171825

2) Using Financial Calculator to calculate the PMT = Annual Withdrawal

Input,

• I/Y = 10%
• N=20
• PV = -171825
• FV = 0

And

Press CPT and then PMT

PMT = 20182.50

Answer 2

1) Using Financial Calculator to calculate the N = number of Months

Input,

• I/Y = 12%/12 = 1%
• PMT = 600
• PV = -25000
• FV= 0

And

Press CPT and then N

N = 54.17 Months So there are 54 full payments of $600

2) Calculation of Last Payment

Using Financial Calculator to calculate the FV = Future Value

Input,

• I/Y = 12%/12 = 1%
• N = 54
• PMT = 600
• PV = -25000

And

Press CPT and then FV

FV = 100.63

Actual Payable at 55th payment = 100.63*(1+1%) = 101.64