Ron Sample is the grand prize winner in a college tuition essay contest awarded through a local organization's scholarship fund. The winner receives $6,000 at the beginning of each year for the next 5 years. How much (in $) should be invested at 6% interest compounded annually to award the prize?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Use Table 12-2 to solve.
Ron Sample is the grand prize winner in a college tuition essay contest awarded through a local organization's scholarship fund. The winner receives $6,000 at the beginning of each year for the next 5 years. How much (in $) should be invested at 6% interest compounded annually to award the prize? (Round your answer to the nearest cent.)

 

TABLE 12-2
Present Value (Amount) of an Ordinary Annuity of $1
Periods
1%
%
2%
3%
4%
5%
6%
7%
8%
Periods
2
1
0.99502 0.99010
0.98522
0.98039
0.97087
0.96154
0.95238
0.94340
0.93458
0.92593
1
2
1.98510
1.97040
1.95588
1.94156
1.91347
1.88609
1.85941
1.83339
1.80802
1.78326
3
2.97025 2.94099
2.91220
2.88388
2.82861
2.77509
2.72325
2.67301
2.62432
2.57710
3
4
3.95050 3.90197
3.85438
3.80773
3.71710
3.62990
3.54595
3.46511
3.38721
3.31213
4
4.92587 4.85343
4.78264
4.71346
4.57971
4.45182
4.32948
4.21236
4.10020
3.99271
6.
5.89638
5.79548
5.69719
5.60143
5.41719
5.24214
5.07569
4.91732
4.76654
4.62288
7
6.86207 6.72819
6.59821
6.47199
6.23028
6.00205
5.78637
5.58238
5.38929
5.20637
7.82296
7.65168
7.48593
7.32548
7.01969
6.73274
6.46321
6.20979
5.97130
5.74664
9.
8.77906 8.56602
8.36052
8.16224
7.78611
7.43533
7.10782
6.80169
6.51523
6.24689
9.
10
9.73041
9.47130
9.22218
8.98259
8.53020
8.11090
7.72173
7.36009
7.02358
6.71008
10
11
10.67703 10.36763
10.07112
9.78685
9.25262
8.76048
8.30641
7.88687
7.49867
7.13896
11
12
11.61893 11.25508 10.90751
10.57534
9.95400
9.38507
8.86325
8.38384
7.94269
7.53608
12
13
12.55615 12.13374 11.73153
11.34837
10.63496
9.98565
9.39357
8.85268
8.35765
7.90378
13
14
13.48871 13.00370 12.54338
12.10625
11.29607 10.56312
9.89864
9.29498
8.74547
8.24424
14
15
14.41662 13.86505 13.34323 12.84926 11.93794 11.11839 10.37966
9.71225 9.10791
8.55948
15
16
15.33993 14.71787 14.13126 13.57771
12.56110 11.65230 10.83777 10.10590
9.44665
8.85137
16
17
16.25863 15.56225 14.90765
14.29187 13.16612 12.16567 11.27407 10.47726
9.76322
9.12164
17
18
17.17277 16.39827 15.67256 14.99203 13.75351
12.65930 11.68959 10.82760 10.05909
9.37189
18
19
18.08236 17.22601 16.42617 15.67846 14.32380 13.13394 12.08532 11.15812 10.33560
9.60360
19
20
18.98742 18.04555 17.16864 16.35143
14.87747 13.59033 12.46221 11.46992 10.59401
9.81815
20
21
19.88798 18.85698 17.90014 17.01121
15.41502 14.02916 12.82115 11.76408 10.83553 10.01680
21
22
20.78406 19.66038 18.62082 17.65805 15.93692 14.45112 13.16300 12.04158 11.06124 10.20074
22
23
21.67568 20.45582 19.33086 18.29220 16.44361
14.85684 13.48857 12.30338 11.27219 10.37106
23
24
22.56287 21.24339 20.03041
18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 10.52876
24
25
23.44564 22.02316 20.71961 19.52346 17.41315 15.62208 14.09394 12.78336 11.65358 10.67478
25
26
24.32402 22.79520 21.39863
20.12104 17.87684 15.98277 14.37519 13.00317 11.82578 10.80998
26
27
25.19803 23.55961 22.06762 20.70690 18.32703 16.32959 14.64303 13.21053 11.98671 10.93516
27
28
26.06769 24.31644 22.72672 21.28127 18.76411 16.66306 14.89813 13.40616 12.13711 11.05108
28
29
26.93302 25.06579 23.37608 21.84438 19.18845 16.98371 15.14107 13.59072 12.27767 11.15841
29
30
27.79405 25.80771 24.01584 22.39646 19.60044 17.29203 15.37245 13.76483 12.40904 11.25778
30
31
28.65080 26.54229 24.64615 22.93770 20.00043 17.58849 15.59281 13.92909 12.53181 11.34980
31
32
29.50328 27.26959 25.26714 23.46833 20.38877 17.87355 15.80268 14.08404 12.64656 11.43500
32
33
30.35153 27.98969 25.87895 23.98856 20.76579 18.14765 16.00255 14.23023 12.75379 11.51389
33
34
31.19555 28.70267 26.48173 24.49859 21.13184
18.41120 16.19290 14.36814 12.85401 11.58693
34
35
32.03537 29.40858 27.07559 24.99862 21.48722 18.66461
16.37419 14.49825 12.94767 11.65457
35
36
32.87102 30.10751 27.66068 25.48884 21.83225 18.90828 16.54685 14.62099 13.03521 11.71719
36
(1 + і)" — 1
The values in Table 12-2 were generated by the formula
rate per period and n is the total number of periods.
and rounded to five decimal places, where i is the interest
i(1 + i)"
67
Transcribed Image Text:TABLE 12-2 Present Value (Amount) of an Ordinary Annuity of $1 Periods 1% % 2% 3% 4% 5% 6% 7% 8% Periods 2 1 0.99502 0.99010 0.98522 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 1 2 1.98510 1.97040 1.95588 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 3 2.97025 2.94099 2.91220 2.88388 2.82861 2.77509 2.72325 2.67301 2.62432 2.57710 3 4 3.95050 3.90197 3.85438 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 4 4.92587 4.85343 4.78264 4.71346 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 6. 5.89638 5.79548 5.69719 5.60143 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 7 6.86207 6.72819 6.59821 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 7.82296 7.65168 7.48593 7.32548 7.01969 6.73274 6.46321 6.20979 5.97130 5.74664 9. 8.77906 8.56602 8.36052 8.16224 7.78611 7.43533 7.10782 6.80169 6.51523 6.24689 9. 10 9.73041 9.47130 9.22218 8.98259 8.53020 8.11090 7.72173 7.36009 7.02358 6.71008 10 11 10.67703 10.36763 10.07112 9.78685 9.25262 8.76048 8.30641 7.88687 7.49867 7.13896 11 12 11.61893 11.25508 10.90751 10.57534 9.95400 9.38507 8.86325 8.38384 7.94269 7.53608 12 13 12.55615 12.13374 11.73153 11.34837 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 13 14 13.48871 13.00370 12.54338 12.10625 11.29607 10.56312 9.89864 9.29498 8.74547 8.24424 14 15 14.41662 13.86505 13.34323 12.84926 11.93794 11.11839 10.37966 9.71225 9.10791 8.55948 15 16 15.33993 14.71787 14.13126 13.57771 12.56110 11.65230 10.83777 10.10590 9.44665 8.85137 16 17 16.25863 15.56225 14.90765 14.29187 13.16612 12.16567 11.27407 10.47726 9.76322 9.12164 17 18 17.17277 16.39827 15.67256 14.99203 13.75351 12.65930 11.68959 10.82760 10.05909 9.37189 18 19 18.08236 17.22601 16.42617 15.67846 14.32380 13.13394 12.08532 11.15812 10.33560 9.60360 19 20 18.98742 18.04555 17.16864 16.35143 14.87747 13.59033 12.46221 11.46992 10.59401 9.81815 20 21 19.88798 18.85698 17.90014 17.01121 15.41502 14.02916 12.82115 11.76408 10.83553 10.01680 21 22 20.78406 19.66038 18.62082 17.65805 15.93692 14.45112 13.16300 12.04158 11.06124 10.20074 22 23 21.67568 20.45582 19.33086 18.29220 16.44361 14.85684 13.48857 12.30338 11.27219 10.37106 23 24 22.56287 21.24339 20.03041 18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 10.52876 24 25 23.44564 22.02316 20.71961 19.52346 17.41315 15.62208 14.09394 12.78336 11.65358 10.67478 25 26 24.32402 22.79520 21.39863 20.12104 17.87684 15.98277 14.37519 13.00317 11.82578 10.80998 26 27 25.19803 23.55961 22.06762 20.70690 18.32703 16.32959 14.64303 13.21053 11.98671 10.93516 27 28 26.06769 24.31644 22.72672 21.28127 18.76411 16.66306 14.89813 13.40616 12.13711 11.05108 28 29 26.93302 25.06579 23.37608 21.84438 19.18845 16.98371 15.14107 13.59072 12.27767 11.15841 29 30 27.79405 25.80771 24.01584 22.39646 19.60044 17.29203 15.37245 13.76483 12.40904 11.25778 30 31 28.65080 26.54229 24.64615 22.93770 20.00043 17.58849 15.59281 13.92909 12.53181 11.34980 31 32 29.50328 27.26959 25.26714 23.46833 20.38877 17.87355 15.80268 14.08404 12.64656 11.43500 32 33 30.35153 27.98969 25.87895 23.98856 20.76579 18.14765 16.00255 14.23023 12.75379 11.51389 33 34 31.19555 28.70267 26.48173 24.49859 21.13184 18.41120 16.19290 14.36814 12.85401 11.58693 34 35 32.03537 29.40858 27.07559 24.99862 21.48722 18.66461 16.37419 14.49825 12.94767 11.65457 35 36 32.87102 30.10751 27.66068 25.48884 21.83225 18.90828 16.54685 14.62099 13.03521 11.71719 36 (1 + і)" — 1 The values in Table 12-2 were generated by the formula rate per period and n is the total number of periods. and rounded to five decimal places, where i is the interest i(1 + i)" 67
TABLE 12-2
Present Value (Amount) of an Ordinary Annuity of $1
(Continued)
Periods
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
Periods
1
0.91743 0.90909
0.90090
0.89286
0.88496
0.87719
0.86957
0.86207
0.85470
0.84746
1
2
1.75911 1.73554
1.71252
1.69005
1.66810
1.64666
1.62571
1.60523
1.58521
1.56564
2
3
2.53129 2.48685
2.44371
2.40183
2.36115
2.32163
2.28323
2.24589
2.20958
2.17427
3
4
3.23972 3.16987
3.10245
3.03735
2.97447
2.91371
2.85498
2.79818
2.74324
2.69006
4
3.88965 3.79079
3.69590
3.60478
3.51723
3.43308
3.35216
3.27429
3.19935
3.12717
4.48592 4.35526
4.23054
4.11141
3.99755
3.88867
3.78448
3.68474
3.58918
3.49760
6.
7
5.03295 4.86842
4.71220
4.56376
4.42261
4.28830
4.16042
4.03857
3.92238
3.81153
7
8.
5.53482 5.33493
5.14612
4.96764
4.79877
4.63886
4.48732
4.34359
4.20716
4.07757
8
9
5.99525 5.75902
5.53705
5.32825
5.13166
4.94637
4.77158
4.60654
4.45057
4.30302
9
10
6.41766 6.14457
5.88923
5.65022
5.42624
5.21612
5.01877
4.83323
4.65860
4.49409
10
11
6.80519 6.49506
6.20652
5.93770
5.68694
5.45273
5.23371
5.02864
4.83641
4.65601
11
12
7.16073 6.81369
6.49236
6.19437
5.91765
5.66029
5.42062
5.19711
4.98839
4.79322
12
13
7.48690 7.10336
6.74987
6.42355
6.12181
5.84236
5.58315
5.34233
5.11828
4.90951
13
14
7.78615 7.36669
6.98187
6.62817
6.30249
6.00207
5.72448
5.46753
5.22930
5.00806
14
15
8.06069 7.60608
7.19087
6.81086
6.46238
6.14217
5.84737
5.57546
5.32419
5.09158
15
16
8.31256 7.82371
7.37916
6.97399
6.60388
6.26506
5.95423
5.66850
5.40529
5.16235
16
17
8.54363 8.02155
7.54879
7.11963
6.72909
6.37286
6.04716
5.74870
5.47461
5.22233
17
18
8.75563 8.20141
7.70162
7.24967
6.83991
6.46742
6.12797
5.81785
5.53385
5.27316
18
19
8.95011 8.36492
7.83929
7.36578
6.93797
6.55037
6.19823
5.87746
5.58449
5.31624
19
20
9.12855 8.51356
7.96333
7.46944
7.02475
6.62313
6.25933
5.92884
5.62777
5.35275
20
21
9.29224 8.64869
8.07507
7.56200
7.10155
6.68696
6.31246
5.97314
5.66476
5.38368
21
22
9.44243 8.77154
8.17574
7.64465
7.16951
6.74294
6.35866
6.01133
5.69637
5.40990
22
23
9.58021 8.88322
8.26643
7.71843
7.22966
6.79206
6.39884
6.04425
5.72340
5.43212
23
24
9.70661 8.98474
8.34814
7.78432
7.28288
6.83514
6.43377
6.07263
5.74649
5.45095
24
25
9.82258 9.07704
8.42174
7.84314
7.32998
6.87293
6.46415
6.09709
5.76623
5.46691
25
26
9.92897 9.16095
8.48806
7.89566
7.37167
6.90608
6.49056
6.11818
5.78311
5.48043
26
27
10.02658 9.23722
8.54780
7.94255
7.40856
6.93515
6.51353
6.13636
5.79753
5.49189
27
28
10.11613 9.30657
8.60162
7.98442
7.44120
6.96066
6.53351
6.15204
5.80985
5.50160
28
29
10.19828 9.36961
8.65011
8.02181
7.47009
6.98304
6.55088
6.16555
5.82039
5.50983
29
30
10.27365 9.42691
8.69379
8.05518
7.49565
7.00266
6.56598
6.17720
5.82939
5.51681
30
31
10.34280 9.47901
8.73315
8.08499
7.51828
7.01988
6.57911
6.18724
5.83709
5.52272
31
32
10.40624 9.52638
8.76860
8.11159
7.53830
7.03498
6.59053
6.19590
5.84366
5.52773
32
33
10.46444 9.56943
8.80054
8.13535
7.55602
7.04823
6.60046
6.20336
5.84928
5.53197
33
34
10.51784 9.60857
8.82932
8.15656
7.57170
7.05985
6.60910
6.20979
5.85409
5.53557
34
35
10.56682 9.64416
8.85524
8.17550
7.58557
7.07005
6.61661
6.21534
5.85820
5.53862
35
36
10.61176 9.67651
8.87859
8.19241
7.59785
7.07899
6.62314
6.22012
5.86171
5.54120
36
(1 + i)" – 1
and rounded to five decimal places, where i is the interest
The values in Table 12-2 were generated by the formula
rate per period and n is the total number of periods.
i(1 + i)"
Transcribed Image Text:TABLE 12-2 Present Value (Amount) of an Ordinary Annuity of $1 (Continued) Periods 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% Periods 1 0.91743 0.90909 0.90090 0.89286 0.88496 0.87719 0.86957 0.86207 0.85470 0.84746 1 2 1.75911 1.73554 1.71252 1.69005 1.66810 1.64666 1.62571 1.60523 1.58521 1.56564 2 3 2.53129 2.48685 2.44371 2.40183 2.36115 2.32163 2.28323 2.24589 2.20958 2.17427 3 4 3.23972 3.16987 3.10245 3.03735 2.97447 2.91371 2.85498 2.79818 2.74324 2.69006 4 3.88965 3.79079 3.69590 3.60478 3.51723 3.43308 3.35216 3.27429 3.19935 3.12717 4.48592 4.35526 4.23054 4.11141 3.99755 3.88867 3.78448 3.68474 3.58918 3.49760 6. 7 5.03295 4.86842 4.71220 4.56376 4.42261 4.28830 4.16042 4.03857 3.92238 3.81153 7 8. 5.53482 5.33493 5.14612 4.96764 4.79877 4.63886 4.48732 4.34359 4.20716 4.07757 8 9 5.99525 5.75902 5.53705 5.32825 5.13166 4.94637 4.77158 4.60654 4.45057 4.30302 9 10 6.41766 6.14457 5.88923 5.65022 5.42624 5.21612 5.01877 4.83323 4.65860 4.49409 10 11 6.80519 6.49506 6.20652 5.93770 5.68694 5.45273 5.23371 5.02864 4.83641 4.65601 11 12 7.16073 6.81369 6.49236 6.19437 5.91765 5.66029 5.42062 5.19711 4.98839 4.79322 12 13 7.48690 7.10336 6.74987 6.42355 6.12181 5.84236 5.58315 5.34233 5.11828 4.90951 13 14 7.78615 7.36669 6.98187 6.62817 6.30249 6.00207 5.72448 5.46753 5.22930 5.00806 14 15 8.06069 7.60608 7.19087 6.81086 6.46238 6.14217 5.84737 5.57546 5.32419 5.09158 15 16 8.31256 7.82371 7.37916 6.97399 6.60388 6.26506 5.95423 5.66850 5.40529 5.16235 16 17 8.54363 8.02155 7.54879 7.11963 6.72909 6.37286 6.04716 5.74870 5.47461 5.22233 17 18 8.75563 8.20141 7.70162 7.24967 6.83991 6.46742 6.12797 5.81785 5.53385 5.27316 18 19 8.95011 8.36492 7.83929 7.36578 6.93797 6.55037 6.19823 5.87746 5.58449 5.31624 19 20 9.12855 8.51356 7.96333 7.46944 7.02475 6.62313 6.25933 5.92884 5.62777 5.35275 20 21 9.29224 8.64869 8.07507 7.56200 7.10155 6.68696 6.31246 5.97314 5.66476 5.38368 21 22 9.44243 8.77154 8.17574 7.64465 7.16951 6.74294 6.35866 6.01133 5.69637 5.40990 22 23 9.58021 8.88322 8.26643 7.71843 7.22966 6.79206 6.39884 6.04425 5.72340 5.43212 23 24 9.70661 8.98474 8.34814 7.78432 7.28288 6.83514 6.43377 6.07263 5.74649 5.45095 24 25 9.82258 9.07704 8.42174 7.84314 7.32998 6.87293 6.46415 6.09709 5.76623 5.46691 25 26 9.92897 9.16095 8.48806 7.89566 7.37167 6.90608 6.49056 6.11818 5.78311 5.48043 26 27 10.02658 9.23722 8.54780 7.94255 7.40856 6.93515 6.51353 6.13636 5.79753 5.49189 27 28 10.11613 9.30657 8.60162 7.98442 7.44120 6.96066 6.53351 6.15204 5.80985 5.50160 28 29 10.19828 9.36961 8.65011 8.02181 7.47009 6.98304 6.55088 6.16555 5.82039 5.50983 29 30 10.27365 9.42691 8.69379 8.05518 7.49565 7.00266 6.56598 6.17720 5.82939 5.51681 30 31 10.34280 9.47901 8.73315 8.08499 7.51828 7.01988 6.57911 6.18724 5.83709 5.52272 31 32 10.40624 9.52638 8.76860 8.11159 7.53830 7.03498 6.59053 6.19590 5.84366 5.52773 32 33 10.46444 9.56943 8.80054 8.13535 7.55602 7.04823 6.60046 6.20336 5.84928 5.53197 33 34 10.51784 9.60857 8.82932 8.15656 7.57170 7.05985 6.60910 6.20979 5.85409 5.53557 34 35 10.56682 9.64416 8.85524 8.17550 7.58557 7.07005 6.61661 6.21534 5.85820 5.53862 35 36 10.61176 9.67651 8.87859 8.19241 7.59785 7.07899 6.62314 6.22012 5.86171 5.54120 36 (1 + i)" – 1 and rounded to five decimal places, where i is the interest The values in Table 12-2 were generated by the formula rate per period and n is the total number of periods. i(1 + i)"
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