Each of the following scenarios is independent. Utilize the appropriate future value or present value table, and calculate the requested amount. Then, if available, utilize the related function in an electronic spreadsheet (or financial calculator) to verify your calculation.
(a) How much will a lump sum of $10,000, invested at 7% per annum, grow to in 20 years?
(b) How much will be in account after 2 years, if $50 is placed into the account at the beginning of each month? Assume the account's interest rate is 6%, with monthly compounding.
(c) How much should be set aside today, so that it will grow to $30,000 in 15 years? The discount rate is 9%.
(d) What is the present worth of an income stream that includes annual end-of-period payments of $100,000 for 20 years? Assume the appropriate discount rate is 8% per year.
"Rodriquez Oil and Gas borrowed $1,000,000 from a local bank to obtain funds needed for the construction of a new drilling rig. This ""construction"" loan was represented by a 2-year, 7%, promissory note, dated April 1, 20X3. Interest (only) is payable on March 31, 20X4, and again at maturity. The $1,000,000 principal is due on March 31, 20X5. Rodriguez repaid the promissory note on March 31, 20X5, as agreed.
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On April 1, 20X5, Rodriguez secured permanent equipment financing via a $1,200,000, 5-year loan. This loan was at 6% per annum, and requires level quarterly payments so that the loan will be completely repaid at its maturity.
(a) Prepare journal entries for the $1,000,000 loan to record the loan's issuance (April 1, 20X3); accrued interest at December 31, 20X3; the
interest payment on March 31, 20X4; accrued interest at December 31, 20X4; and the final payment at maturity (March 31, 20X5).
(b) Calculate the required quarterly payment for the 5-year loan.
(c) Prepare journal entries to record the 5-year loan, and its first two quarterly payments.
(d) Optional: Use an electronic spreadsheet to prepare a 20-quarter amortization schedule, showing how the loan will be fully amortized by its maturity.