Financial maths question, HELP!!

Question

An annuity involves saving $3000 per year at 7.3% per annum for 8 years.
(i) Use the present value formula to calculate the single amount of money which could be invested at the same rate and for the same amount of time to give the same final amount.
(ii) Using the compound interest formula, find the final amount of the investment.
(iii) Using the future value annuity formula, check that the annuity gives the same final amount.

Answer 1

What is your question? What do you not understand? Where are the formulas you are asked to use? Assigning your problems for others to solve is not helping you learn. You have to make an effort to show that you are at least attempting a solution. Show your work.

 

You can look up the formulas. I will solve this with a financial calculator which is much faster and simpler, but you can also use a spreadsheet function.

 

You have to solve (ii) before you can solve (i)

The amount of the annuity is based on

 

PV = 0

PMT = 3,000

i% = 7.3%

N = 8 years

FV = ? == 31,113.91

 

Input the known variables into the formula, spreadsheet, or calculator and solve for the unknown item.

 

To achieve this with a single investment you use

 

PV = ?

PMT = 0

i% = 7.3%
N = 8 years
FV = 31,113.91i

 

 

PV = 17,707.48