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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Jeni has decided that she needs to start saving for her retirement. She can afford $100 a month deducted automatically from her paycheck. She deposits it into an account that earns 4.5% interest compounded monthly. How much will she have in her account when she retires 42 years later? A. $ 14,922.70 B.$ 50,400.00 C. $132,213.00 D. $149,226.96
Slick Sam has a special relationship with his banker. The nature of the relationship is as follows: • The bank owes Sam $100 per year forever. The 1st payment is due in 1 year. • The bank will borrow or lend money to Sam at a constant effective rate of i per year. Today, Sam calculated the present value of the payments that are due to him as X. Sam can receive his first 16 payments at the end of year 16 in a lump sum. If he does that, then the total value of the lump sum and future payments at the end of the sixteenth year is X + 2,000. Calculate X. A B с D E 3,330 3,350 3,400 3,450 3,500
20.
Mohammed is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $40,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 10%, what income can Mr. Mohammed expect to receive each year? (Choose the correct answer from below options and attach all your explanations in the other link provided) Select one: a. 27256 b. 272 c. 2725 d. 272560
Your client, Karna, has asked you for some advice. He would like to know how much he can contribute to his RRSP in the current year without over contributing. Karna has a carry forward amount of $16,000 and a pension adjustment of $6,000 from the previous year. In addition Karna has been divorced for the past three years and pays $2,500 per month in alimony. Given this scenario and based on the financial information below, how much can Karna contribute this year? Base Salary Commission Bonus Investment Portfolio Capital Gains Dividends $5,000 $6,000 Total taxable income $136,000 Select one: Current Year Previous Year $85,000 $80,000 $25,000 $30,000 $15,000 $18,000 a. $29,080 b. $27,100 c. $27,640 d. $29,260 $4,000 $5,000 $137,000
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Imagine you are helping a client, Jill Pole, prepare for retirement Jill would like to withdraw $14,411 from her retirement fund exactly one month after she quits her job. Jill would like all subsequent monthly withdrawals to grow at an effective annual rate of 2.5%. Further, Jill would like to have her funds invested to earn an effective annual return of 7.7%. Jill expects to live for 26 years once she retires and does not plan to leave an inheritance. How much does Jill need to have in her retirement account on the day she retires in order to fund this stream of growing monthly distributions from her retirement account?.
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