Question

Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your...

Answer each of the following independent questions. Ignore personal income taxes.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

Suppose you invest $4,500 in an account bearing interest at the rate of 14 percent per year. What will be the future value of your investment in five years?

Your best friend won the state lottery and has offered to give you $12,000 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 12 percent annual interest. What is the present value of your friend’s future gift?

In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $72,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 6 percent per year in order to accumulate the $72,500 purchase price?

You have estimated that your educational expenses over the next four years will be $15,000 per year. How much money do you need in your account now in order to withdraw the required amount each year? Your account bears interest at 10 percent per year.

Homework Answers

Answer #1
Future value=Principal (1+Interest rate)^Duration
Future value=4500*(1+0.14)^5=4500*1.925=8664
Present value =12000*[(1/1.12)^4]=12000*0.6355=$7626
Money need to invest in each year=Property cost/Present value of interest rate for 4 years=72500/3.465=$ 20923.52
Present value of future payments:
Year Required
Amount
PV @ 10% Present value
1 15000 0.909091 13636.36
2 15000 0.826446 12396.69
3 15000 0.751315 11269.72
4 15000 0.683013 10245.2
47547.98
Total amount need to be in the account=$47547.98
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Scenario 1. Suppose you invest a sum of $ 5000 in an​ interest-bearing account at the...
Scenario 1. Suppose you invest a sum of $ 5000 in an​ interest-bearing account at the rate of 10 ​% per year. What will the investment be worth six years from​ now? ​(Round your answer to the nearest whole​ dollar.) In six years the investment will be worth _______. Scenario 2. How much would you need to invest now to be able to withdraw $ 11,000 at the end of every year for the next 20​ years? Assume an 8...
Problem 5 [Following questions are independent of each other] a) If the inflation is 8% per...
Problem 5 [Following questions are independent of each other] a) If the inflation is 8% per year and the market interest rate paid by the bank is 12% per year, how much would be your real earning rate if you invest money into the bank? b) Suppose that you rented your business property to receive the rent annually. At the end of each year you will receive 60,000 TL then-current money for 5 years. If the annual inflation rate is...
You plan on buying yourself a retirement cabin in the Rocky Mountains 40 years from now....
You plan on buying yourself a retirement cabin in the Rocky Mountains 40 years from now. At an interest rate of 5 percent per year, how much must you invest each year (equal annual amounts beginning next year) to have $150,000 in your cabin fund in 40 years? please solve using excel
PLEASE SHOW WORK FOR THE QUESTIONS BELOW Question 1 If you invest $14,441 today at an...
PLEASE SHOW WORK FOR THE QUESTIONS BELOW Question 1 If you invest $14,441 today at an interest rate of 5.99 percent, compounded daily, how much money will you have in your savings account in 3 years? Round the answer to two decimal places. Question 2 To what amount will the following investment accumulate? $38,756, invested today for 19 years at 10.42 percent, compounded monthly. Round the answer to two decimal places. Question 3 You placed $4,067 in a savings account...
You plan to retire at age 40 after a highly successful but short career. You would...
You plan to retire at age 40 after a highly successful but short career. You would like to accumulate enough money by age 40 to withdraw $232,000 per year for 40 years. You plan to pay into your account 15 equal installments beginning when you are 25 and ending when you are 39. Your account bears interest of 10 percent per year. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: How much do you...
Show your calculations and answer the following questions - An investment will pay you $120 in...
Show your calculations and answer the following questions - An investment will pay you $120 in one year and $200 in two years. Calculate the present value of these cash flows if the interest rate is 4%. -Suppose you invest $1000 in an account paying 6% interest per year. What is the balance in the account after 3 years? Calculate how much of this balance corresponds to “interest on interest” - If Brandon receives 6 percent interest rate on his...
Show your calculations and answer the following questions - An investment will pay you $120 in...
Show your calculations and answer the following questions - An investment will pay you $120 in one year and $200 in two years. Calculate the present value of these cash flows if the interest rate is 4%. -Suppose you invest $1000 in an account paying 6% interest per year. What is the balance in the account after 3 years? Calculate how much of this balance corresponds to “interest on interest” - If Brandon receives 6 percent interest rate on his...
1. You want to be able to withdraw $35,000 each year for 25 years. Your account...
1. You want to be able to withdraw $35,000 each year for 25 years. Your account earns 5% interest. a) How much do you need in your account at the beginning? b) How much total money will you pull out of the account? c) How much of that money is interest? 2. You want to buy a $23,000 car. The company is offering a 2% interest rate for 48 months (4 years). What will your monthly payments be? 3. Suppose...
*PLEASE ANSWER ALL QUESTIONS Problem 1: A credit car company wants your business. If you use...
*PLEASE ANSWER ALL QUESTIONS Problem 1: A credit car company wants your business. If you use their card, they deposit 1% of all your monetary transactions into a savings account that earns 5% per year. If you spend on average $20,000 dollars a year, how much money will you have in the savings account after 15 years? Problem 2: Sam wants 2 million dollars in net worth when he retires. In order to achieve this, he plans to invest $10,000...
3c3. You need to accumulate $75,706 for your son's education. You have decided to place equal...
3c3. You need to accumulate $75,706 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 5 years. The savings account pays 14.25 percent per year, compounded annually. How much will each annual payment be? Round the answer to two decimal places. 3b3. You plan to buy a house in 13 years. You want to save money for a down payment on the new house. You are able to place $323...