Assume that your father is now 50 years old, plans to retire in10 years, and expects to live for 25 years after he retires - thatis, until age 85. He wants his first retirement payment to have thesame purchasing power at the time he retires as $50,000 has today.He wants all of his subsequent retirement payments to be equal tohis first retirement payment. (Do not let the retirement paymentsgrow with inflation: Your father realizes that if inflation occursthe real value of his retirement income will decline year by yearafter he retires). His retirement income will begin the day heretires, 10 years from today, and he will then receive 24additional annual payments. Inflation is expected to be 6% per yearfrom today forward. He currently has $100,000 saved and expects toearn a return on his savings of 7% per year with annualcompounding. To the nearest dollar, how much must he save duringeach of the next 10 years (with equal deposits being made at theend of each year, beginning a year from today) to meet hisretirement goal? (Note: Neither the amount he saves nor the amounthe withdraws upon retirement is a growing annuity.)
Assume that your father is now 50 years old, plans to retire in10 years, and expects to live for 25 years after he retires - thatis, until age 85. He wants his first retirement payment to have thesame purchasing power at the time he retires as $50,000 has today.He wants all of his subsequent retirement payments to be equal tohis first retirement payment. (Do not let the retirement paymentsgrow with inflation: Your father realizes that if inflation occursthe real value of his retirement income will decline year by yearafter he retires). His retirement income will begin the day heretires, 10 years from today, and he will then receive 24additional annual payments. Inflation is expected to be 6% per yearfrom today forward. He currently has $100,000 saved and expects toearn a return on his savings of 7% per year with annualcompounding. To the nearest dollar, how much must he save duringeach of the next 10 years (with equal deposits being made at theend of each year, beginning a year from today) to meet hisretirement goal? (Note: Neither the amount he saves nor the amounthe withdraws upon retirement is a growing annuity.)
Related questions
The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. The closer we are to the end of the loan's life, the smaller the percentage of the payment that will be a repayment of principal.
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2. The market value of any real or financial asset, including stocks, bonds, or art work purchased in hope of selling it at a profit, may be estimated by determining future cash flows and then discounting them back to the present.
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3. A bond has a $1,000 par value, makes annual interest payments of $100, has 5 years to maturity, cannot be called, and is not expected to default. The bond should sell at a premium if interest rates are below 10% and at a discount if interest rates are greater than 10%.
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4.Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?
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5. A 15-year bond has an annual coupon rate of 8%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 6%. Which of the following statements is CORRECT?
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6. Which of the following statements is CORRECT?
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7. Your investment account pays 6.8%, compounded annually. If you invest $5,000 today, how many years will it take for your investment to grow to $9,140.20?
Select the correct answer.
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8. You want to purchase a motorcycle 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?
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9. Suppose you earned a $135,000 bonus this year and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years?
Select the correct answer.
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10.Your older brother turned 35 today, and he is planning to save $30,000 per year for retirement, with the first deposit to be made one year from today. He will invest in a mutual fund that's expected to provide a return of 7.5% per year. He plans to retire 30 years from today, when he turns 65, and he expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can he spend each year after he retires? His first withdrawal will be made at theend of his first retirement year.
Select the correct answer.
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11. Rogoff Co.'s 15-year bonds have an annual coupon rate of 9.5%. Each bond has face value of $1,000 and makes semiannual interest payments. If you require an 11% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Select the correct answer.
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12. Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000 . The going interest rate (rd) is 9.75%, based on semiannual compounding. What is the bond's price?
Select the correct answer.
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