This is a 3 part question:
1.)If you require a 9 percent return on your investments, which would you prefer?
a) $5,000 to day
b) $15,000 five years from now.
.
2.) Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years, so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61 st through 80 th birthday. The account is expected to earn 10 percent per annum for the entire period of his time. Determine the size of the annual deposit that must be made by Mr. Moore.
Hint: Do it in two steps. First find out now ( PV) how much is the total money required if he wants to withdraw $ 25,000 per year for a certain length of time. That will be the future value and now find out how much money he has to put in to realize that money. Be careful when it is an annuity use appropriate annuity tables.
3.) Find approximately the amount you would be willing to pay for a $ 1000 par value bond paying $80 interest each year and maturing in 12 years, assuming you would earn a 9 percent rate of return?
You calculate the price of the bond here
****Must Show All Work For Each Part
This is a 3 part question:
1.)If you require a 9 percent return on your investments, which would you prefer?
a) $5,000 to day
b) $15,000 five years from now.
.
2.) Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years, so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61 st through 80 th birthday. The account is expected to earn 10 percent per annum for the entire period of his time. Determine the size of the annual deposit that must be made by Mr. Moore.
Hint: Do it in two steps. First find out now ( PV) how much is the total money required if he wants to withdraw $ 25,000 per year for a certain length of time. That will be the future value and now find out how much money he has to put in to realize that money. Be careful when it is an annuity use appropriate annuity tables.
3.) Find approximately the amount you would be willing to pay for a $ 1000 par value bond paying $80 interest each year and maturing in 12 years, assuming you would earn a 9 percent rate of return?
You calculate the price of the bond here
****Must Show All Work For Each Part
