Mathematics of Finance Assignment 3
Work in groups.
Show all work. Circle your final answer
1. (3 Marks) What sum of money must be set aside at a child’s birth to provide for 9 annual payments of
$20,000 to pay for the child’s post-secondary education? The first payment comes on the child’s 19th
birthday. The interest rate is 6% compounded annually.
A = 20 000 / 1 – ( 4 + 0.06 ) = 236 633, 8455
The sum of money need to set aside equal :quot;
156035, 8455 –
(1 + 0 06) 18 –
= 47658. 61
2. (3 Marks) You would like to open a business in 3 years. This business will require $500,000 to startup. How
much should you deposit at the end of each month for the next three years into an account so that you will
have the required $500,000 at the end of three years. This account already has $100,000 in it. The interest
rate is 6% compounded monthly.
3. (3 Marks) Jill deposits $100 at the beginning of each month into an account paying 6% compounded
monthly. She makes these monthly deposits for 5 years. How much money is in her account at the end of 5
(3 Marks) $10,000 is borrowed today at an interest rate of 6% compounded annually. The loan is to be
repaid with 6 annual payments, with the first payment coming at the end of 3 years. What is the size of the