(2.3.5) A senior executive is offered a buyout package by his company that will payhim a monthly benefit for the next 20 years. Monthly benefits will remain constant within eachof the 20 years. At the end of each 12- month period, the monthly benefits will be adjustedupwards to reflect the percentage increase in the CPI(an inflation rate). You are given:(i) The first monthly benefit is R and will be paid on month from today.(ii) The CPI incrases 3.2% per year forever.At an annual effective interest rate of 6%, the buyout package has a value of 100000. CalculateR.

The present value of a growing annuity is the current worth of an annuity growing at a certain rate…

Answered: (2.3.5) A senior executive is offered a…

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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Assume that you will have a 10-year, $20,000 loan to repay when you graduate from college next month. The loan, plus 10 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $3,255 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $3,255). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Interest Period Date of Graduation Year 1 Year 2 Year 3 Annual Payment Annual Interest Expense @10% a. Actual net-of-tax interest cost b. Effective interest rate Reduction in Unpaid Balance Unpaid Balance One of the advantages of borrowing is that interest is deductible for income tax purposes. a.…
if a client earns 100 000$ per annum now and is guaranteed of 5% increase over the 12 years to retirement, what will the retirement salary be?
You are working for a finance firm and a client comes to you and wants to know how much money they should put in an annuity (which earns 2.885% interest compounded quarterly) at the end of each three months for the next 36 years. Their goal is that when they retire at the end of 36 years, they would like the quarterly withdrawals from the annuity to total $68,000 per year and that the annuity is to last for the next 23 years. You are to determine the amount which your client needs to deposit into the annuity at the end of each three months for the next 36 years so that they can meet their retirement goal. Do the following: Show all your work that you used to answer this problem. Label the steps and important values as you solve the problem. Note that when you use the TVM Solver, show the all variables and the values you entered (into the variables) and solved for. Find the total amount of interest client will earn (from the time they start contributing to the account to when they…
Assume that you will have a 10-year, $10,000 loan to repay when you graduate from college next month. The loan, plus 8 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $1,490 each, beginning one year after you graduate. You have accepted a wellpaying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $1,490). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round amounts to the nearest dollar.)
If you have been hired at an annual salary of $23000and expeck to receive annual increases of 5% what will your salary be when you begin your seventh year?
In January, you start a job with Acme manufacturing at salary of $66,000 per year paid in equal amounts over 12 months. You have negotiated for a guaranteed 3% raise each year while you work at Acme and you decide to save 10% of your monthly income for retirement. Assume interest equals 1%/month compounded monthly. What is the balance of your retirement account at the end of five years?
Please answer this correrctly I'll rate!
Assume you have secured a loan of $10,000 from a bank which will be paid in one year. The bank has offered you $850 monthly installments, which equates to a 3.67% annualized interest rate. The monthly interest rate of 0.31% is the annual rate divided by 12. You know that the interest is paid at the end of the period, so you can multiply the opening balance by the monthly interest rate to get the interest paid. What is the interest rate to be paid for the month of October? Month Payment Interest Principal Opening Balance Closing Balance January $850.00 $10,000.00 February $850.00 March $850.00 April $850.00 May $850.00 June $850.00 July $850.00 August $850.00 September $850.00 October $850.00 November $850.00 December $850.00 Monthly Rate 0.31% Annual Rate 3.67% Total Interest Paid Group of answer choices a. 2.25…
An insurance firm agrees to pay you $3,310 at the end of 20 years if you pay a premium of $100 per year at the end of each of the 20 years. Find the internal rate of return to the nearest whole percentage point. 9% O 7% 5% 3% O 11%
An insurance policy provides a benefit of $12,000 nine years from now. Alternatively, the policy pays $820.94 at the beginning of each year for nine years. What is the effective annual rate of interest paid? The effective annual rate of interest is %. (Round to two decimal places as needed.)
Aunt May will start receiving quarterly pension ($5000 quarterly paycheck) beginning one quarter from now. The pension will continue for the next 25 years. The quarterly paycheck will increase by 5% each year to adjust for inflation. What is the total value of Aunt May's pension as of today, assuming a nominal interest rate of 6% compounded monthly? A. Between $350,000 and $380,000 B. Between $380,000 and $400,000 C. Between $400,000 and $420,000 D. Between $420,000 and $440,000 E. More than $440,000
A recent television commercial made the statement that if a person invests $750 at the beginning of each month for 35 years, they could have $1,000,000 for retirement. Assuming monthly compounding, what annual interest rate is implied in this statement?

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