It is now January 1, 2009; and you will need $1,000 on January 1, 2013, in 4 years. Your bank compounds interest at an 8% annual rate.
a) How much must you deposit today to have a balance of $1,000 on January 1, 2013?
b) If you want to make four equal payments on each January 1 from 2010 through 2013 to accumulate the $1,000, how large must each payment be?
c) If your father offers to make the payments calculated in Part b ($221.92) or to give you $750 on January 1, 2010 (a year from today), which would you choose? Explain.
d) If you have only $750 on January 1, 2010, what interest rate, compounded annually for 3 years, must you earn to have $1,000 on January 1, 2013?