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21.doc-Accounting, 9e, Global Edition (Horngren) Chapter
Page 36
20) Billy Pierce invests $1,000 at the end of each year for 5 years at 9%.
What is the future value of the investment?
Future Value
of an
Annuity of
$1
4%
5%
6%
7%
8%
9%
1
1.000
1.000
1.000
1.000
1.000
1.000
2
2.040
2.050
2.060
2.070
2.080
2.090
3
3.122
3.153
3.184
3.215
3.246
3.278
4
4.246
4.310
4.375
4.440
4.506
4.573
5
5.416
5.526
5.637
5.751
5.867
5.985
6
6.633
6.802
6.975
7.153
7.336
7.523
7
7.898
8.142
8.394
8.654
8.923
9.200
8
9.214
9.549
9.897
10.26
10.64
11.03
9
10.58
11.03
11.49
11.98
12.49
13.02
10
12.01
12.58
13.18
13.82
14.49
15.19
A) $5,985
B) $1,250
C) $4,599
D) $7,523
Answer:
A
Explanation:
A) Calculations:
5.985 × $1,000 = $5,985
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
36
Copyright © 2012 Pearson Education
Page 37
21) Billy Pierce invests $8,000 at the end of each year for 5 years at 6%.
What is the future value of the investment?
Future Value
of an
Annuity of
$1
4%
5%
6%
7%
8%
9%
1
1.000
1.000
1.000
1.000
1.000
1.000
2
2.040
2.050
2.060
2.070
2.080
2.090
3
3.122
3.153
3.184
3.215
3.246
3.278
4
4.246
4.310
4.375
4.440
4.506
4.573
5
5.416
5.526
5.637
5.751
5.867
5.985
6
6.633
6.802
6.975
7.153
7.336
7.523
7
7.898
8.142
8.394
8.654
8.923
9.200
8
9.214
9.549
9.897
10.26
10.64
11.03
9
10.58
11.03
11.49
11.98
12.49
13.02
10
12.01
12.58
13.18
13.82
14.49
15.19
A) $45,096
B) $51,008
C) $49,599
D) $47,523
Answer:
A
Explanation:
A) Calculations:
5.637 × $8,000 = $45,096
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
37
Copyright © 2012 Pearson Education
Page 38
22) If Billy Pierce invests $1,000 at the end of each year for 8 years, and he wants it to grow to at least $10,000,
what interest rate would be needed?
Future Value
of an
Annuity of
$1
4%
5%
6%
7%
8%
9%
1
1.000
1.000
1.000
1.000
1.000
1.000
2
2.040
2.050
2.060
2.070
2.080
2.090
3
3.122
3.153
3.184
3.215
3.246
3.278
4
4.246
4.310
4.375
4.440
4.506
4.573
5
5.416
5.526
5.637
5.751
5.867
5.985
6
6.633
6.802
6.975
7.153
7.336
7.523
7
7.898
8.142
8.394
8.654
8.923
9.200
8
9.214
9.549
9.897
10.26
10.64
11.03
9
10.58
11.03
11.49
11.98
12.49
13.02
10
12.01
12.58
13.18
13.82
14.49
15.19
A) 4%
B) 5%
C) 6%
D) 7%
Answer:
D
Explanation:
D) Calculations:
10.26 × $1,000 = $10,260
Diff: 2
LO:
21-3
EOC Ref:
S21-8
AACSB:
Analytic Skills
AICPA Business:
Critical Thinking
AICPA Functional:
Measurement
38
Copyright © 2012 Pearson Education
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