Question

Determine the value of each described annuity. Each annuity is ordinary, unless otherwise specified.

An initial lump sum payment of $50, 000, followed by semi-annual contributions of $10, 000, growing at a nominal rate of 5.7% compounding semi-annually, for 10 years.

(c) Invest $1, 000 monthly into a bond fund, with a 2.4% APR, compounded monthly. Invest another $1, 000 monthly into an equity fund returning 6.1% yearly, compounded monthly. Make both investments over a span of 20 years.

(d) Consider the same investment scheme as (c), but add in one time initial lump sum investment of $100, 000, split 20-80 into bond and equities.

2. In saving for your retirement, you figure you need about $1, 000, 000 to maintain your lifestyle. You are currently 22, and figure you can safely put away $1000/month into an account which averages 6.6% per year (compounded monthly). At what age can you retire?

Answer 1