Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about 8 years and figures she'll need about $50,000 in capital to do so. Given that she thinks she can make about 10 percent on her money, use Worksheet 11.1 Download Worksheet 11.1 to answer the following questions. How much would Ashley have to invest today, in one lump sum, to end up with $50,000 in 8 years? If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in 8 years? How about if she already has $10,000 socked away; how much would she have to put away annually to accumulate the required capital in 8 years? Given that Ashley has an idea of how much she needs to save, briefly explain how she could use an investment plan to help reach her objective.
Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about 8 years and figures she'll need about $50,000 in capital to do so. Given that she thinks she can make about 10 percent on her money, use Worksheet 11.1 Download Worksheet 11.1 to answer the following questions. How much would Ashley have to invest today, in one lump sum, to end up with $50,000 in 8 years? If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in 8 years? How about if she already has $10,000 socked away; how much would she have to put away annually to accumulate the required capital in 8 years? Given that Ashley has an idea of how much she needs to save, briefly explain how she could use an investment plan to help reach her objective.
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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Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about 8 years and figures she'll need about $50,000 in capital to do so. Given that she thinks she can make about 10 percent on her money, use Worksheet 11.1 Download Worksheet 11.1 to answer the following questions.
How much would Ashley have to invest today, in one lump sum, to end up with $50,000 in 8 years?
If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in 8 years?
How about if she already has $10,000 socked away; how much would she have to put away annually to accumulate the required capital in 8 years?
Given that Ashley has an idea of how much she needs to save, briefly explain how she could use an investment plan to help reach her objective.
Transcribed Image Text:Worksheet 11.1
Financial goal:
Determining Amount of Investment Capital
1. Targeted Financial Goal (see Note 1)
2. Projected Average Return on Investments
A. Finding a Lump Sum Investment:
3. Future Value Factor, from Appendix A, computed here
• based on
years to target date and a projected average
%
return on investment of
4. Required Lump Sum Investment
• line 1 + line 3
B. Making a Series of Investments over Time:
5. Amount of Initial Investment, if any (see Note 2)
6. Future Value Factor, from Appendix A, computed here
• based on
years of target date and a projected average
% (1 + i)^time
return on investment of
7. Terminal Value of Initial Investment
line 5 x line 6
$
$
%
0.000
0.000
Transcribed Image Text:8. Balance to Come from Savings Plan
• line 1- line 7
9. Future Value Annuity Factor, from Appendix B, computed here
• based on
Note 1:
years to target date and a projected average
% using FV function for value of
10. Series of Annual Investments Required over Time
•
line 8+ line 9
Note 2:
return on investment of
$
es
$
The "targeted financial goal" is the amount of money you want to accumulate by
some target date in the future.
If you're starting from scratch-i.e., there is no initial investment-enter zero on
line 5, skip lines 6 and 7, and then use the total targeted financial goal (from line 1)
as the amount to be funded from a savings plan; now proceed with the rest
of the worksheet.
0.00
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