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. Matthew needed money for some unexpected expenses, so he borrowed $3,900.55 from a friend and agreed to repay the loan in four equal installments of $1,100 at the end of each year. The agreement is offering an implied 5% -5.90%%4.35% interest rate of 6.75% Matthew's friend, Gregory, has hired a financial planner for advice on retirement. Considering Gregory's current expenses and expected future lifestyle changes, the financial planner has stated that once Gregory crosses a threshold of $4,136,860 in savings, he will have enough money for retirement. Gregory has nothing saved for his retirement yet, so he plans to start depositing $40,000 in a retirement fund at a fixed rate of 5.00% at the end of for Gregory to reach his retirement goal. each year. It will take 137.30yRs 50.36 yes 46.63 yes 31.71 yes
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. Matthew needed money for some unexpected expenses, so he borrowed $3,900.55 from a friend and agreed to repay the loan in four equal installments of $1,100 at the end of each year. The agreement is offering an implied 5% -5.90%%4.35% interest rate of 6.75% Matthew's friend, Gregory, has hired a financial planner for advice on retirement. Considering Gregory's current expenses and expected future lifestyle changes, the financial planner has stated that once Gregory crosses a threshold of $4,136,860 in savings, he will have enough money for retirement. Gregory has nothing saved for his retirement yet, so he plans to start depositing $40,000 in a retirement fund at a fixed rate of 5.00% at the end of for Gregory to reach his retirement goal. each year. It will take 137.30yRs 50.36 yes 46.63 yes 31.71 yes
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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Transcribed Image Text:# 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.
Matthew needed money for some unexpected expenses, so he borrowed $3,900.55 from a friend and agreed to repay the loan in four equal installments of $1,100 at the end of each year. The agreement is offering an implied interest rate of 5.90%.
Matthew's friend, Gregory, has hired a financial planner for advice on retirement. Considering Gregory's current expenses and expected future lifestyle changes, the financial planner has stated that once Gregory crosses a threshold of $130,000 in savings, he can consider retirement. Gregory has nothing saved for his retirement yet, so he plans to start depositing $4,000 in a retirement fund at a fixed rate of 5.00% at the end of each year. It will take ___ years for Gregory to reach his retirement goal.
### Calculations:
- **3.730 years**
- **50.36 years**
- **46.63 years**
- **31.71 years**
These numbers are listed in a handwritten box, indicating the various computed durations based on different calculations or scenarios. Each was likely derived from different financial assumptions or models applied to Gregory's retirement savings plan.
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