Question

​(Future value​) Sarah Wiggum would like to make a single​ lump-sum investment and have ​$1.7 million...

​(Future value​) Sarah Wiggum would like to make a single​ lump-sum investment and have ​$1.7 million at the time of her retirement in 28 years. She has found a mutual fund that expects to earn 5 percent annually. How much must Sarah invest​ today? If Sarah earned an annual return of 16 ​percent, how much must she invest​ today?

  1. If Sarah can earn 5 percent annually for the next 28 ​years, how much will she have to invest​ today?

$ ​(Round to the nearest​ cent.)

  1. If Sarah can earn 16 percent annually for the next 28 ​years, how much will she have to invest​ today?

$ (Round to the nearest cent.)

Homework Answers

Answer #1

Part A:

Present Value:

Present value is current value of Future cash flows discounted at specified discount Rate.

PV = FV / (1+r)^n
Where r is Int rate per period
n - No. of periods

Particulars Amount
Future Value $      1,700,000.00
Int Rate 5.0000%
Periods 28

Present Value = Future Value / ( 1 + r )^n
= $ 1700000 / ( 1 + 0.05 ) ^ 28
= $ 1700000 / ( 1.05 ) ^ 28
= $ 1700000 / 3.9201
= $ 433659.18

Part B:

Present Value:

Particulars Amount
Future Value $      1,700,000.00
Int Rate 16.0000%
Periods 28

Present Value = Future Value / ( 1 + r )^n
= $ 1700000 / ( 1 + 0.16 ) ^ 28
= $ 1700000 / ( 1.16 ) ^ 28
= $ 1700000 / 63.8004
= $ 26645.58

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
​ (Present value)  Sarah Wiggum would like to make a single investment and have ​$1.6 million...
​ (Present value)  Sarah Wiggum would like to make a single investment and have ​$1.6 million at the time of her retirement in 28 years. She has found a mutual fund that will earn 5 percent annually. How much will Sarah have to invest​ today? If Sarah earned an annual return of 17 ​percent, how soon could she then​ retire?   a.  If Sarah can earn 5 percent annually for the next 28 ​years, the amount of money she will have...
Sarah Wiggum would like to make a single investment and have ​$ 1.3 million at the...
Sarah Wiggum would like to make a single investment and have ​$ 1.3 million at the time of her retirement in 30 years. She has found a mutual fund that will earn 3% annually. How much will Sarah have to invest​ today? If Sarah invests that amount and could earn a 15% annual​ return, how soon could she​ retire, assuming she is still going to retire when she has ​$ ​1.3 million?   Click on the table icon to view the...
Sarah Wiggum would like to make a single investment and have $2.3 million at the time...
Sarah Wiggum would like to make a single investment and have $2.3 million at the time of her retirement in 34 years. She has found a mutual fund that will earn 8 percent annually. How much will Sarah have to invest​ today? If Sarah earned an annual return of 16 ​percent, how soon could she then​ retire?  
Sarah Wiggum would like to make a single investment and have ​$1.9 million at the time...
Sarah Wiggum would like to make a single investment and have ​$1.9 million at the time of her retirement in 25 years. She has found a mutual fund that will earn 55 percent annually. How much will Sarah have to invest​ today? If Sarah earned an annual return of 15 ​percent, how soon could she then​ retire?
1.Sarah Wiggum would like to make a single investment and have $1.8 million at the time...
1.Sarah Wiggum would like to make a single investment and have $1.8 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 7 percent annually. How much will Sarah have to invest​ today? If Sarah earned an annual return of 18 ​percent, how soon could she then​ retire? a. If Sarah can earn 7 percent annually for the next 35 years, the amount of money she will have to invest today...
Sarah Wiggum would like to make a single investment and have ​$1.3 million at the time...
Sarah Wiggum would like to make a single investment and have ​$1.3 million at the time of her retirement in 30 years. She has found a mutual fund that will earn 3 percent annually. How much will Sarah have to invest​ today? If Sarah invests that amount and could earn a 13 percent annual​ return, how soon could she​ retire, assuming she is still going to retire when she has ​$1.3 ​million?  
Sarah Wiggum would like to make a single investment and have $2 million at the time...
Sarah Wiggum would like to make a single investment and have $2 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? If sarah invests that amount and could earn a 14 percent annual return, how soon could she retire, assuming she is still going to retire when she has $2 million?
You would like to have ​$73,000 in 14 years. To accumulate this​ amount, you plan to...
You would like to have ​$73,000 in 14 years. To accumulate this​ amount, you plan to deposit an equal sum in the bank each year that will earn 9 percent interest compounded annually. Your first payment will be made at the end of the year. a.  How much must you deposit annually to accumulate this​ amount? b.  If you decide to make a large​ lump-sum deposit today instead of the annual​ deposits, how large should the​ lump-sum deposit​ be? ​...
A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum...
A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum D Funding – Lump sum funds ordinary level annuity E Funding – Lump sum funds delayed level annuity F Funding – Ordinary level annuity funds lump sum G Funding – Ordinary level annuity funds delayed level annuity H Choosing Among Alternatives Classify the problem as one of the above types. Choose Only One You plan to retire 5 years from now. You want to...
A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum...
A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum D Funding – Lump sum funds ordinary level annuity E Funding – Lump sum funds delayed level annuity F Funding – Ordinary level annuity funds lump sum G Funding – Ordinary level annuity funds delayed level annuity H Choosing Among Alternatives Classify the problem as one of the above types. Choose Only One You plan to retire 5 years from now. You want to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT