A) Ms. Diana wants to take off next three years of work to travel around the world. She estimates her average annual cash need is $20,000. If she needs more funds, she will arrange from alternative ways i.e. taking loans or doing some odd jobs etc. Ms. Diana believes that she can invest her savings at 10% until she depletes her funds. You are required to find out how much she should invest now to fund her future cash flow if she is able invests at 10% annually OR what amount she has to invest if she only earns 7% annually. The relevant factors from table you will need for this calculation are given below. a) Future value interest factor for a one-dollar annuity compounded from the table at 10% is 3.3100 and at 7% is 3.2149 on period#3 b) Present value interest factor for a one-dollar annuity discounted from the table at 10% is 2.4869 and at 7% is 2.6243 on period#3
A) Ms. Diana wants to take off next three years of work to travel around the world. She
estimates her average annual cash need is $20,000. If she needs more funds, she will arrange
from alternative ways i.e. taking loans or doing some odd jobs etc.
Ms. Diana believes that she can invest her savings at 10% until she depletes her funds.
You are required to find out how much she should invest now to fund her future cash
flow if she is able invests at 10% annually OR what amount she has to invest if she only
earns 7% annually.
The relevant factors from table you will need for this calculation are given below.
a)
3.3100 and at 7% is 3.2149 on period#3
b)
2.4869 and at 7% is 2.6243 on period#3
B) What is the difference between Present value & Future value?
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