19. Jennifer and Rex both receive a dividend from their 401(k) retirement plan every 6 months. The earning rates for this year have been 5% per year, compounded quarterly for Jennifer, and 4.85% per year, compounded monthly for Rex. Rex felt good about this because he knew the monthly com- pounding on his plan would make his APY higher than Jennifers APY. (a) Is Rex correct? Explain your answer. (b) What is the effective rate for each plan on the basis of the payment period?

19. Jennifer and Rex both receive a dividend from their 401(k) retirement plan every 6 months. The earning rates for this year have been 5% per year, compounded quarterly for Jennifer, and 4.85% per year, compounded monthly for Rex. Rex felt good about this because he knew the monthly com- pounding on his plan would make his APY higher than Jennifers APY. (a) Is Rex correct? Explain your answer. (b) What is the effective rate for each plan on the basis of the payment period?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Craig and sally just got married .they want to have $750.000 in a retirement account in 40 years . How much should they deposit at the end of every 6 months sat 2% compounded semiannually in order to reach this goal?
Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he ex- pects to live for 25 years after he retires, that is, until he is 85. He wants a fixed retirement in- come that has the same purchasing power at the time he retires as $40,000 has today (he real- izes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then get 24 ad- ditional annual payments. Inflation is expected to be 5 percent per year from today forward; he currently has $100,000 saved up; and he expects to earn a return on his savings of 8 percent per year, annual compounding. To the nearest dollar, how much must he save during each of the years (with deposits being made at the end of each year) to meet his retirement goal? 6-22 Required annuity payments next 10
9. Implied interest rate and period Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. Ryan inherited an annuity worth $3,280.16 from his uncle. The annuity will pay him five equal payments of $800 at the end of each year. The annuity fund is offering a return of Ryan's friend, Sebastian, wants to go to business school. While his father will share some of the expenses, Sebastian still needs to put in the rest on his own. But Sebastian has no money saved for it yet. According to his calculations, it will cost him $30,044 to complete the business program, including tuition, cost of living, and other expenses. He has decided to deposit $4,200 at the end of every year in a mutual fund, from which he expects to earn a fixed 7% rate of return. It will take approximately for Sebastian to save enough money to go to business school.
You annually invest $2,000 in an individual retirement account (IRA) starting at the age of 30 and make the contributions for 15 years. Your twin sister does the same starting at age 35 and makes the contributions for 25 years. Both of you earn 7 percent annually on your investment. What amounts will you and your sister have at age 60? Use Appendix A and Appendix C to answer the question. Round your answers to the nearest dollar.Amount on your account: $ Amount on your sister's account: $ Who has the larger amount at age 60?-Select-You haveYour sister hasItem 3 the larger amount.
1.I plan to deposit $376 into my retirement every year for the next 25 years. The first deposit will be made today (that is, at t = 0) and the last deposit will be made at the end of year 24 (that is, at t = 24). I plan to make no other deposits. Assuming that I will earn 12.13% p.a. on my retirement funds, how much money will I have accumulated 36 years from today (that is, at t = 36)? Round your answer to 2 decimal places; record your answer without commas and without a dollar sign. 2. Assume that you deposit $ 1,038 each year for the next 15 years into an account that pays 11 percent per annum. The first deposit will occur one year from today (that is, at t = 1) and the last deposit will occur 15 years from today (that is, at t = 15). How much money will be in the account 15 years from today? Round your answer to 2 decimal places; record your answer without commas and without a dollar sign.
(3).
1. If Dave and his employer contribute a total of $10,000 annually, how much will that amount accumulate to over the next 30 years, at which time Dave and Sharon hope to retire? Future Value of Annuity Contribution Years Annual rate of return Future value $10,000 30 7.00% $944,607.86 2. Assuming that Dave's marginal tax bracket is 25 percent, by how much should his federal taxes decline this year if he contributes $7,000 to his retirement account? 3. The Sampsons' tax bracket has not changed. Assuming that Dave contributes $7,000 to his retirement account and that his taxes are lower as a result, by how much are Dave's cash flows reduced over the coming year? (Refer to your answer in question 2 when solving this problem.) 4. If Dave contributes $7,000 to his retirement account, he will have less cash inflows as a result. How can the Sampsons afford to make this contribution? Suggest some ways that they may be able to offset the reduction in cash inflows.
Baghiben
Your retired client has accumulated investment and retirement assets. He is happy with an after - tax lifestyle of $ 165,000 a year at the end of the year for 18 years. Leaving aside issues of inflation, his assets can will earn after-tax interest rate of 10.90 percent per year compounded annually. How much has your client accumulated? Round the answer to two decimal places. Your Answer:
Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 6% per year from today forward. He currently has $125,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning…
Hi can someone help me with this question?
Sandra plans to retire and can receive a lump sum of $26,376 from her pension provider. She decides to invest of the lump sum for 8 years and use the rest for 3 travelling. Her bank account pays 4.99% compound interest per annum. How much interest will Sandra receive from this investment after 8 years? Round your answer to the nearest thousand dollars. %24

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