solution

1. You get a \$12,000 bonus annually. You plan to save it for your first home down payment in three years.

a. Which formula will you use to determine how much you will have for a down payment?

(1) PMT({1 âˆ’ [1/(1 + i)n ]}/i)

(2) PMT{[(1 + i)n âˆ’ 1]/I}

(3) PMT{[(1 âˆ’ i)n âˆ’ 1]/i}

(4) PMT[(1/1 + i)n /i]

b. If you decided to compute the value using the reference table method, what factor would you use if you were earning a 3% interest rate annually?

(1) 3.091

(2) 2.829

(3) 0.915

(4) 1.093

c. Using a calculator, which values would you use to solve for FV?

(1) N = 3; I/YR = 3; PV = 12,000; PMT = 0

(2) N = 3; I/YR = 3; PV = 0; PMT = 12000

(3) N = 3; I/YR = 3; PV = âˆ’12,000; PMT = 0

(4) N = 3; I/YR = 3; PV = 0; PMT = âˆ’12,000

d. How much will you have as a down payment in three years?

(1) \$38,828.60

(2) \$36,915.10

(3) \$37,090.80

(4) \$37,092.70

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