Question

# Example 1: Future Value (FV) of a Present Single Sum Your client has \$500,000 in an...

Example 1: Future Value (FV) of a Present Single Sum
Your client has \$500,000 in an IRA and has asked you to estimate
its value when the client reaches retirement age in 8 years, assuming

a 6% return each year.

Example 2: Future Value (FV) of a present single Sum with
Multiple Interest Rates
Same facts as Example 1 except the client would like to adjust the
asset allocation of the investments over time, evolving from a
more aggressive strategy during the earlier years intro a more
conservative investment approach as she approaches retirement.
Thus, she projects to earn a 10% annnual return during the first
two years of the investment period, and 8%, 6%, and 4% returns

over each of the next two-year periods, respectively.

Example 3: Future Value (FV) of a Series of Payments (Annuity Due)
Your client would like to contribute \$12,000 to a retirement account
at the beginning of each year for the next 20 years, earning an

annual return of 6%.

Example 4: Future Value (FV) of a Series of Payments (Ordinary Annuity)
Your client to make monthly deposits to the retirement account. Assume
your client makes deposits of \$1,000 at the end of each month for

20 years and earns 6% per year on his investments over that time.

 Example 5: Future Value (FV) of a Series of Payments (Ordinary Annuity) to Combine with Existing Retirement Account Using the same facts as Example 4 but further assume that the client already has accumulated \$200,000 in retirement savings.

 1) Future Value = Amount(1+i)^N =500000(1+0.06)^8 =796924.04 2) Future Value = Amount(1+i)^N =500000(1.1*1.1*1.08*1.08*1.06*1.06*1.04*1.04) =857593.13 3) Future Value of Annuity Due ={Amount[(1+i)^N-1](1+i)}/i ={12000[(1.06)^20-1](1.06)}/0.06 =467912.72 4) Future Value of Ordinary Annuity =Amount[(1+i)^N-1]/i =1000[(1.06)^20-1]/0.06 =36785.59 5) Future Value of accumulated sum = Amount(1+i)^N =200000(1+0.06)^20 =641427.09 Future Value of Ordinary Annuity =Amount[(1+i)^N-1]/i =1000[(1.06)^20-1]/0.06 =36785.59 Future Value of total value invested =641427.09+36785.59 =678212.68

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