(b) Mr Jackson has two investment options: i. Offers 19, 75% p.a. compounded semi-annually. ii. Offers 19% p.a. compounded monthly. Determine the equivalent continuous compounding rate in each option. Which option should Mr Jackson consider? Why? (c) Professor Tesfalem decides to retire from his position in 12-years. What amount should be invested today so that he will be able to withdraw R30000 at the end of each year for 20-years after he retires? Assume he can invest money at 8% interest compounded annually.

(b) Mr Jackson has two investment options: i. Offers 19, 75% p.a. compounded semi-annually. ii. Offers 19% p.a. compounded monthly. Determine the equivalent continuous compounding rate in each option. Which option should Mr Jackson consider? Why? (c) Professor Tesfalem decides to retire from his position in 12-years. What amount should be invested today so that he will be able to withdraw R30000 at the end of each year for 20-years after he retires? Assume he can invest money at 8% interest compounded annually.

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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Your employer offers a 401(k) plan with a 32% match, and you set a goal of retiring in 26 years with an amount of money which has the same buying power that 1.7 million dollars has today. If the account earns an annual interest rate of 2% and the expected annual rate of inflation is 1.2%, how much should you contribute each month to the 401(k)? Round your answer to the nearest dollar.
You are offered a $2,800,000 retirement package to be given in $100,000 payments at the end of each of the next 28 years. You are also given the option of accepting a $1,150,000 lump sum payment now. Interest rates are at 8.5% over the next 28 years. Which is a better option? the offered annual payments of $100,000the lump sum of $1,150,000 they are the samecannot be determined
Timothy is retiring from his job soon at which time his employer will make the following offer: 1. A lumpsum amount of $200,0002. A sum of $15,000 at the beginning of each year for the next 25 years. If the average interest rate is likely to be 5.5% p.a. for the next 25 years, which option should Timothy choose?
Mr. Limpiado received two offers on a lot that he wants to sell. First Offer: Php 20,000 down payment anda Php 800,000 lump sum payment 6 years from now. Second Offer: Php 25,000 down payment plus Php 30.000 every quarter for 6 years. Both money earns at 6.5% compounded annually. What is the fair market value of the 2nd offer if the focal date is at the start of the term? A. Php 619, 897.79 B. Php 610, 945.79 C. Php 583, 499.79 O D. Php 574, 598.79
Using the TVM calculator, compare the following if the investment pays 7%/a compound annually and payments are made until age 65. Calculate the future value of each investment and the total amount paid in. which would you choose? a) depositing $1500 every year starting at age 20. b) depositing $4500 every year starting at age 50.
Jacob wishes to borrow $80,000 from his bank, J.P. Morgan, in order to expand his business. J. P. Morgan agrees to lend him the money over a 5-year term at an APR of 8% and will accept either annual, quarterly, or monthly payments with no change in the quoted APR. Calculate the periodic payment under each alternative and compare the total amount paid each year under each option. Which period should Jacob choose and why? Show your calculations using a formula.
1. Eight years from today, Mrs. Luna will retire. At that time, Mrs. Luna will receive a severance pay of 600 million. Instead of receiving severance pay, Mrs. Luna agrees to receive 100 million now, 200 million in the fifth year from now, and X million ten years from now. If the interest rate is compounded at 8% every 6 months, what is the value of X? (Hint: Use the compound interest present value (initial savings) formula).
You are planning to retire in 25 years time. Immediately after your retirement, you wish to go for a round the world trip lasting one year. Your monthly expenses for the trip work out to be £9000 and the first withdrawal will be made at the end of the month after your retirement. You also want to provide yourself with £35,000 a year for next 15 years on your return from the world trip. the monthly saving amount is 136.07 if the effective rate of interest is 14% per annum.Your firm has a retirement plan that matches all employee contributions with employer contributions on a two-to-one basis. That is if an employee contributes £1,000 per year, the company will add £2,000 to make the total contribution £3,000. The firm guarantees a fixed 6 per cent return on the funds. Alternatively, you can provide for retirement yourself, and you think you can earn 9 per cent on your money. The first contribution will be made one year from today. At that time and every year thereafter, you will put…
Alicia's investment manager offers her an interest rate of 8.0% compounded monthly on her investments. If the manager changes his mind and offers her a rate of 8.0% compounded annually how much more would she have to deposit at the end of each year in order to accumulate $445,000 in 20 years? Round to the nearest cent

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