Financial Planning Assignment Chapter 14
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Rafay Ahmed
Chapter 14
21 – Mar - 23
Answer 1A)
Using the Appendix B, the annuity factor for 4 percent for 40 years is 95.026. Thus, investing
$3,000 per year will amount to $285,078 ($3,000 * 95.026). Using a financial calculator
Using the FV Excel function,
3,000 +/- PMT
40
N
=FV(.04,40,3000) = $285,077
4
I/YR
FV
$285,077
Answer 1B)
Using the Appendix B, the annuity factor for 10 percent for 40 years is 442.593. Thus, investing
$3,000 per year will amount to $1,327,779 ($3,000 * 442.593). Using a financial calculator
Using the FV Excel function,
3,000 +/- PMT
40
N
=FV(.10,40,3000) = $1,327,778
10
I/YR
FV
$1,327,778
Answer 1C)
Assuming funds earn 10%:
Brian will only be able to invest for 30 years. Using Appendix B,
the annuity factor for 10% for 30 years is 164.494. Thus, investing $3,000 per year will amount
to $493,482 ($3,000 * 164.494). Using a financial calculator
Using the FV Excel function,
3,000 +/- PMT
30
N
=FV(.10,30,3000) = $493,482
10
I/YR
FV
$493,482
Planning for Retirement
Page 1
Rafay Ahmed
Chapter 14
21 – Mar - 23
Assuming funds earn 4%:
Brian will only be able to invest for 30 years. Using Appendix B,
the annuity factor for 4% for 30 years is 56.085. Thus, investing $3,000 per year will amount to
$168,255 ($3,000 * 56.085). Using a financial calculator
Using the FV Excel function,
3,000 +/- PMT
30
N
=FV(.10,30,3000) = $168,255
4
I/YR
FV
$168,255
The ability to accumulate funds for retirement depends upon the amount you invest, the time
available to build the fund, and the return you can earn. Olivia has ten years more than Brian, so
she has a greater likelihood of building a larger retirement fund.
Answer 2)
The Excel PMT function may be used to determine the amount of annual savings they will need to make
to fund their retirement. The formula is PMT(.06,20,0,-1298063) = $35,287.
The worksheet computes the retirement funds needed in perpetuity, $51,922.50 / .04 = $1,298,063. If you
assume that their life expectancy is 20 years after retirement and that annually they will withdraw some
principal as well as income, the amount needed is PV(.04,20,-51922) = $705,637. Their heirs would
prefer that they accumulate the larger amount.
Planning for Retirement
Page 2
Rafay Ahmed
Chapter 14
21 – Mar - 23
Worksheet 14.1, Chapter 14, Exercise 2
Date
I.
A.
B.
$
C.
expenses, may be 100%.
125 %
D.
II.
E.
$
F.
$
G.
$
H.
I.
III.
J.
3 %
K.
Based on
20
years to
annual rate of inflation (J) of
3%
L.
IV.
M.
4 %
N.
O.
6 %
P.
Based on
20
on investments of
6%
Q.
years to retirement (A) and an expected rate of return
36.786
Annual savings required to fund retirement nest egg (N ÷ P)
35,287.00
$ Note: Parts I and II are prepared in terms of current (today’s) dollars.
Future value of an annuity interest factor (Appendix B)
Inflation Factor:
Expected average annual rate of
inflation
over the period to retirement
Inflation factor (in Appendix A):
retirement (A) and an expected average
1.806
Size of inflation-adjusted annual shortfall (I × K)
51,922.50
$ Funding the Shortfall:
Anticipated return on assets held after
retirement
Amount of retirement funds required—size of nest egg (L ÷ M)
1,298,063.00
$ Expected rate of return on investments prior
to retirement
Other sources, annual amounts
Total annual income (E + F + G)
65,000.00
$ Additional required income, or annual shortfall (D - H)
28,750.00
$ Company/employer pension plans, annual amounts
35,000.00
Estimated Household Expenditures in Retirement:
Approximate number of years to retirement
20
Current level of annual household expenditures, excluding savings
75,000.00
Estimated household expenses in retirement as a percent of current
Estimated annual household expenditures in retirement (B × C)
93,750.00
$ Estimated Income in Retirement:
Social security, annual income
30,000.00
PROJECTING RETIREMENT INCOME AND INVESTMENT NEEDS
Name(s)
Paul and Crystal Myer
Planning for Retirement
Page 3
Rafay Ahmed
Chapter 14
21 – Mar - 23
Answer 3)
The worksheet reports that Lindsay will need $10,612.85 annually in order to fund her
retirement. The three factors that impact retirement funds are time, amount, and return. She has
allowed only 15 years to fund her retirement, thus she has started too late to comfortably fund the
amount she needs. Need to start earlier, that is at age 25.
As discussed in answer to problem 2, if she expects to live 20 years after retirement, the amount
she needs is at retirement is $179.556 [PV(.05,20,14400)] and the annual amount she needs to
save now is $6,613 [PMT(.08,15,179456)].
Planning for Retirement
Page 4
Rafay Ahmed
Chapter 14
21 – Mar - 23
Worksheet 14.1, Chapter 14, Exercise 3
Date
I.
A.
B.
$
C.
expenses, may be 100%.
80 %
D.
II.
E.
$
F.
$
G.
$
H.
I.
III.
J.
4 %
K.
Based on
15
years to
annual rate of inflation (J) of
4%
L.
IV.
M.
5 %
N.
O.
8 %
P.
Based on
15
on investments of
8%
Q.
years to retirement (A) and an expected rate of return
27.152
Annual savings required to fund retirement nest egg (N ÷ P)
10,612.85
$ Note: Parts I and II are prepared in terms of current (today’s) dollars.
Future value of an annuity interest factor (Appendix B)
Inflation Factor:
Expected average annual rate of
inflation
over the period to retirement
Inflation factor (in Appendix A):
retirement (A) and an expected average
1.801
Size of inflation-adjusted annual shortfall (I × K)
14,408.00
$ Funding the Shortfall:
Anticipated return on assets held after
retirement
Amount of retirement funds required—size of nest egg (L ÷ M)
288,160.00
$ Expected rate of return on investments prior
to retirement
Other sources, annual amounts
Total annual income (E + F + G)
32,000.00
$ Additional required income, or annual shortfall (D - H)
8,000.00
$ Company/employer pension plans, annual amounts
12,000.00
Estimated Household Expenditures in Retirement:
Approximate number of years to retirement
15
Current level of annual household expenditures, excluding savings
50,000.00
Estimated household expenses in retirement as a percent of current
Estimated annual household expenditures in retirement (B × C)
40,000.00
$ Estimated Income in Retirement:
Social security, annual income
20,000.00
PROJECTING RETIREMENT INCOME AND INVESTMENT NEEDS
Name(s)
Lindsay McCoy
Planning for Retirement
Page 5
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Related Questions
Question 4 of 5
Using Technological Tools: Future Value of a Single Sum - Knowledge Check
Knowledge Check
0.34/1
You deposit $600 today into a fund that you intend to leave invested for 6 years. The fund earns 4% interest compounded
annually. Indicate the inputs to be entered into the financial calculator keys. What is the value of the fund to be accumulated at the
end of year 6? (Round future value answer to two decimal places (e.g., 52.75) and interest rate to one decimal place (e.g., 527.5).)
Inputs
Calculator Keys
N
Future value
$
Save for Later
N/A
?
PV
PMT FV
Attempts: 0 of 3 used
Submit Answer
SUPPORT
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Chapter 10 Discussion Q2
A perpetuity will pay $900 per year, starting five years after the perpetuity is purchased. What is the present value (PV) at time 0, given that the interest rate is 11%? Show your steps.
A) $2695
B) $4312
C) $5390
D) $3234
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Vijay
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QUESTION 8
Keira wants to invest $4,300 in an account with an interest rate of 7.2% that is compounded MONTHLY. Which of the following choices
will correctly calculate the amount of money in Keira's account after 9 years?
9
O A. Amount = 4300x 7.2xe
B. Amount = 0.072x9xe4300
C.
12x9
7.2
Amount = 4300 1+ )
12
O D. Amount = 4300e0.072 x 9
12 x9
O E.
Amount = 4300 1+
0.072
12
O F. Amount = 4300e7.2x 9
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QUESTION 5
Katharine Bartle will receive an annuity of $4,090.00 every month for 23 years. How much is this cash flow worth to them today if the
payments begin today? Assume a discount rate of 5.00%.
Oa. $55,398.13
b. $2,119,880.47
c. $672,837.73
Od. $170,156.69
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question 15
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nt question
Q1. Find the present value of 30 annual payments of $2,000 per annum where the first payment is made 14 years from now. So there are 30 annual payments from t=14 to t=43 inclusive. The discount rate is 5% pa. The present value of these payments is:
Question 8Select one:
a.
$4,908.18
b.
$16,304.68
c.
$21,212.85
d.
$30,282.15
e.
$30,744.9
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QUESTION 9
Norbert Chapa is saving for retirement by putting away $6,090.00 every day for 6 years. How much is this investment worth at the end of 6 years if payments begin today"
Assume an interest rate of 1.00%.
Oa. $35,295.42
b. $12,945,053.24
Oc. $13,745,519.33
O d. $37,466.80
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Question 14
Suppose for an annuity due, you want to have $30,000 in the bank after 20 years. Assuming you make deposits at the beginning of
each year at an interest rate of 4%, how much would you have to deposit at the start of each year, assuming that each deposit is the
same amount?
A) s968.70
B
$816.22
$625.00
$737.24
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Problem 5-26 Spreadsheet Problem: Number of Annuity Payments (LG5-10)
You realize that you can retire when you have $1 million in assets. You currently have $500,000 in retirement assets and contribute
$540 more each month? If your investment portfolio earns an 8 percent annual rate of return, how long will it be until you can retire?
Note: Do not round intermediate calculations and round your final answer to 2 decimal places.
Years
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Question 7 of 10
>
Every year you deposit $3,400 into an account that earns 2% interest per year. What will be the balance of your account immediately after the 20th deposit?
Click the icon to view the interest and annuity table for discrete compounding when i = 2% per year.
Choose the correct answer below
O A. $79,464
O B. $68,000
OC. $82,611
OD. $51,438
O E $84,263
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QUESTION 7
You expect to receive $1,000 at the end of each of the next 3 years. You will deposit these payments into an account which pays 10 percent
compounded annually. What is the future value of these payments, that is, the value at the end of the third year?
O $3,000.00
O $3,310.00
O $3,318.01
O $3,400.96
16
O $3,438.27
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Question 15
What is the present value of your investment if you deposited $100.00 into your
bank account at the beginning of each quarter for 10 years if the bank pays interest
is 6% compounded semi-annually?
a. $2,854.90
b. $3,036.46
c. $1,628.23
d. $3042.28
e. $900.17
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ques 15
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Hi sir hope you are doing well pls help
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7How much more is a perpetuity paying $5000 at the end of year worth than an annuity paying the same annual amounts at the end of each year for 30 years? Assume an interest rate of 5%. a. $10,635.08 b. $21,976.29 c. $50,000.00 d. $23,137.74
8Miller's Hardware plans on saving $40,000, $50,000, and $58,000 at the end of each year for the next three years, respectively. How much will the firm have saved at the end of the three years if it can earn 6% by reinvesting its saving? a. $155,944.00 b. $169,004.13 c. $148,000.00 d. $148,078.15
9On the day you retire you have $500,000 saved. You expect to live another 30 years during which time you expect to earn 8% on your savings while inflation averages 3.5% annually. Assume you want to spend the same amount each year in real terms and die on the day you spend your last dime. What real amount will you be able to spend each year?
a. $61,931.78 b. $79,211.09 c. $79,644.58 d. $30,695.77
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pls answer and show cash flow diagram
I will invest $500 per quarter for my retirement at 7.3% compounding quarterly for 32 years. I have achoice of making that payment of $500 at the beginning or the end of the quarter (regular annuity orannuity due). In which account will I have more money and by how much? Which account will earn themost interest and by how much? Ans: Regular Annuity‐ $249981.20, Interest = $185981.20; Annuity Due‐ $254543.36, Interest =$190543.36
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QUESTION 42
Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate:
Following are appropriate factors from tables:
Table
% / n
Present Value of annuity due $1
Present Value of ordinary annuity of $1
Present value of $1
Future Value of ordinary annuity of $1
6%/30
12.15812
13.76483
.17411
79.05819
$????????? invested annually at the end of the year. Required Computations:
$12,648.91
$72,648.92
$33,3333.33
$11,927.43
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4900
$585
PNG
se th
er ye
the
What is the present value of an annuity of
$4,000 received at the beginning of each
year for the next eight years? The first
payment will be received today, and the
discount rate is 9% (round to nearest $1).
Select one:
a. $36,288
b. $35,712
c. $25,699
d. $24,132 ✔
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sd
subject-Accounting
You are considering an investment that will pay $24668 in 20 years. If the interest rate is 13.79%, what is the most you should be willing to invest today? (Round to 2 decimal places.)
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QUESTION 3
You have been told that you need $25,600 today in order to have $100,000 when you retire 35 years from now. What rate of interest was used in the present value
computation? Assume interest is compounded annually.
O A. 3.97 percent O C D. 4.53 percent
B. 4.15 percent OC.4.29 percent
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QUESTION 42
Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30
years @ 6% annual interest rate:
Following are appropriate factors from tables:
Table
% / n
Present Value of
annuity due $1
6%/30
12.15812
$33,3333.33
O $72,648.92
Present Value of
ordinary annuity of $1
13.76483
Present value of $1
.17411
$????????? invested annually at the end of the year. Required Computations:
O $12,648.91
O $11,927.43
Future Value of
ordinary annuity of
$1
79.05819
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A Question 11
You deposit $5000 each year into your retirement account, starting in one year. If
these funds earn an average of 5% per year over the 27 years until your retirement,
what will be the value of your retirement account upon retirement?
Your Answer:
Answer
Hide hint for Question 11
NOTICE THAT THE ONLINE FINANCIAL CALCULATOR HAS THE BUTTON FOR
PAYMENTS MADE AT THE END OF THE PERIOD. THIS IS THE DEFAULT OF THE
CALCULATOR, AND THE WORDS 'STARTING IN ONE YEAR' ARE JUST
CONFIRMATION THAT YOU WANT THAT END OF THE PERIOD BUTTON
SELECTED.
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QUESTION 41
Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate:
Following are appropriate factors from tables:
Table
% / n
Present Value of annuity due $1
Present Value of ordinary annuity of $1
Present value of $1
Future Value of ordinary annuity of $1
6%/30
12.15812
13.76483
.17411
79.05819
One single deposit of $???????? for 30 years. Required Computations:
$166,666.66
$174,110
$175,933.83
$126,489
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Pls answer correctly asap
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Related Questions
- Question 4 of 5 Using Technological Tools: Future Value of a Single Sum - Knowledge Check Knowledge Check 0.34/1 You deposit $600 today into a fund that you intend to leave invested for 6 years. The fund earns 4% interest compounded annually. Indicate the inputs to be entered into the financial calculator keys. What is the value of the fund to be accumulated at the end of year 6? (Round future value answer to two decimal places (e.g., 52.75) and interest rate to one decimal place (e.g., 527.5).) Inputs Calculator Keys N Future value $ Save for Later N/A ? PV PMT FV Attempts: 0 of 3 used Submit Answer SUPPORTarrow_forwardChapter 10 Discussion Q2 A perpetuity will pay $900 per year, starting five years after the perpetuity is purchased. What is the present value (PV) at time 0, given that the interest rate is 11%? Show your steps. A) $2695 B) $4312 C) $5390 D) $3234arrow_forwardVijayarrow_forward
- QUESTION 8 Keira wants to invest $4,300 in an account with an interest rate of 7.2% that is compounded MONTHLY. Which of the following choices will correctly calculate the amount of money in Keira's account after 9 years? 9 O A. Amount = 4300x 7.2xe B. Amount = 0.072x9xe4300 C. 12x9 7.2 Amount = 4300 1+ ) 12 O D. Amount = 4300e0.072 x 9 12 x9 O E. Amount = 4300 1+ 0.072 12 O F. Amount = 4300e7.2x 9arrow_forwardQUESTION 5 Katharine Bartle will receive an annuity of $4,090.00 every month for 23 years. How much is this cash flow worth to them today if the payments begin today? Assume a discount rate of 5.00%. Oa. $55,398.13 b. $2,119,880.47 c. $672,837.73 Od. $170,156.69arrow_forwardquestion 15arrow_forward
- nt question Q1. Find the present value of 30 annual payments of $2,000 per annum where the first payment is made 14 years from now. So there are 30 annual payments from t=14 to t=43 inclusive. The discount rate is 5% pa. The present value of these payments is: Question 8Select one: a. $4,908.18 b. $16,304.68 c. $21,212.85 d. $30,282.15 e. $30,744.9arrow_forwardQUESTION 9 Norbert Chapa is saving for retirement by putting away $6,090.00 every day for 6 years. How much is this investment worth at the end of 6 years if payments begin today" Assume an interest rate of 1.00%. Oa. $35,295.42 b. $12,945,053.24 Oc. $13,745,519.33 O d. $37,466.80arrow_forwardQuestion 14 Suppose for an annuity due, you want to have $30,000 in the bank after 20 years. Assuming you make deposits at the beginning of each year at an interest rate of 4%, how much would you have to deposit at the start of each year, assuming that each deposit is the same amount? A) s968.70 B $816.22 $625.00 $737.24arrow_forward
- Problem 5-26 Spreadsheet Problem: Number of Annuity Payments (LG5-10) You realize that you can retire when you have $1 million in assets. You currently have $500,000 in retirement assets and contribute $540 more each month? If your investment portfolio earns an 8 percent annual rate of return, how long will it be until you can retire? Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Yearsarrow_forwardQuestion 7 of 10 > Every year you deposit $3,400 into an account that earns 2% interest per year. What will be the balance of your account immediately after the 20th deposit? Click the icon to view the interest and annuity table for discrete compounding when i = 2% per year. Choose the correct answer below O A. $79,464 O B. $68,000 OC. $82,611 OD. $51,438 O E $84,263arrow_forwardQUESTION 7 You expect to receive $1,000 at the end of each of the next 3 years. You will deposit these payments into an account which pays 10 percent compounded annually. What is the future value of these payments, that is, the value at the end of the third year? O $3,000.00 O $3,310.00 O $3,318.01 O $3,400.96 16 O $3,438.27arrow_forward
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