2.27. You decide to put $10,000 in a money market fund that pays interest at the annual rate of 7.2%, compounding it monthly. You plan to take the money out after one year and pay the income tax on the interest earned. You are in the 25% tax bracket. Find the total amount available to you after taxes.

2.27. You decide to put $10,000 in a money market fund that pays interest at the annual rate of 7.2%, compounding it monthly. You plan to take the money out after one year and pay the income tax on the interest earned. You are in the 25% tax bracket. Find the total amount available to you after taxes.

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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You are saving up for a down payment on a house. You will deposit P600 a month for the next 24 months in a money market fund. How much will you have for your down payment in 24 months if the fund earns 10% annual percentage rate compounded monthly? * 14,480 15,870 12,930 10,560 9,890 What's the future value of P1,200 after 5 years if the appropriate interest rate is 6%, compounded monthly? * 1,537.69 1,618.62 1,699.55 1,784.53 1,873.76 What is the present value of the following cash flow stream at a rate of 6.25%? YEAR O=0 YEAR 1= P75 YEAR 2= P225 YEAR 3=PO YEAR 4=P300 * 411.57 433.23 456.03 480.03 505.30
Suppose you just won the state lottery, and you have a choice between receiving $2,515,000 today or a 20-year annuity of $220,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. O a. 6.88% O b. 12.96% O c. 6.04% O d. 5.69% O e. 8.75%
Please answer using life-cycle problem. Suppose the interest rate is 5%, the income tax rate 35%, the tax rate on investment income is 20%, and the investment horizon 40 years. (a) What is the final payoff after tax if $100 pre-tax income is invested in a regular savings account? (b) What is the final payoff after tax if $100 pre-tax income is invested in a retirement account? (c) What is the final payoff after tax if $100 pre-tax income is invested in a Roth account?
Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
Use the savings plan formula to answer the following question. You put $300 per month in an investment plan that pays an APR of 3.5%. How much money will you have after 19 years? Compare this amount to the total deposits made over the time period.
You deposit $175,000 in a savings account. The APR (Annual Percentage Rate) is 6%. Calculate the following: A) Assuming that the interest is compounded once a year, what is the amount accumulated after ten years? Is the answer to this 313,398.35? or is it possibly $318,311.03? The TA for my class and the teacher have taught this in two separate ways and I am getting different answers based ont the 2 methods.
Suppose you're fresh out of college and have a new job where you're able, by being frugal, to put aside $400 from each monthly paycheck for 2 years to invest in a fund that pays you 6% interest, compounded monthly. By the end of two years you would have put $9600 total into that fund, and it would be worth $10,223.65 at that point. Not bad. You've made over $600! But by then there are other constraints on your monthly paycheck and you can't continue your good habit. However, you leave that $10,223.65 invested in the fund that pays 6% compounded monthly. How much is that investment worth when you go back to claim it when you retire, exactly 46 years later? Round your answer to the nearest dollar,
You plan to establish a college education fund for your child. The current cost of college is $12,000 per year and you expect this to increase by 5% per year. You plan to deposit money into an account earning 10% per year at the end of each of the next 18 years. You will withdraw the amount required for college at the end of years 18-22. You want the deposit to be low initially and grow by the rate of your salary increase, which you estimate to be 3.5%. What will be the first deposit?How much will be in the account after 8 years?
You buy a car for $34,000. You pay $10,000 down and finance the rest at 3% monthly over five years. If the payment is rounded up to the nearest dollar, what is the final payment?
You've decided to leave a scholarship to Calu's business program in the amount of $3,000 annually. If you can earn 6% on your money annually and inflation is 2%, how much do you need to set aside to ensure the program never runs out of money?
Assuming a tax rate of 30%, a nominal return of 9%, a savings period of 35 years, and an annual deposit of $10,000 into an RRSP, how much will a person have saved for retirement? What is your recommendation regarding when the contributions should be made to the RRSP? Justify your answer using the time value of money

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