You want to have $2.5 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 11 percent and the inflation rate is 3 percent. What real amount must you deposit each year to achieve your goal?

answer

watching

252

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Jean KeelingLv2

28 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

A. Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds will be 9 percent. What will these bonds sell for at issuance?

B. You want to have $1.5 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 11 percent and the inflation rate is 3.8 percent. What real amount must you deposit each year to achieve your goal?

C. Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent,

C.1 what is the percentage change in the price of Bond Sam?

C.2. Of Bond Dave?

C.3. If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then?

C.4. Of Bond Dave?

tealseal860

Today, you turn 21. Your birthday wish is that you will be amillionaire by your 40th birthday. In an attempt to reach thisgoal, you decide to save $75 a day, every day, until you turn 40.You open an investment account and deposit your first $75 today.What rate of return must you earn to achieve your goal? Note:Ignore Leap Years.

Multiple Choice

7.67 percent
6.27 percent
9.20 percent
7.06 percent
8.54 percent

purpleswan271

Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5 percent on your investments.

a. What nominal rate of interest would have to be offered on a one-year Treasury security for you to consider making an investment?

b. A one-year corporate debt security is being offered at 2 percentage points over the one-year Treasury security rate that meets your requirement in (a). What would be the nominal interest rate on the corporate security?

greenplatypus571

Weekly leaderboard

Home

Homework Help 3,900,000

Finance 370,000