BTN 13-6 You are to devise an investment strategy to enable you to accumulate $1,000,000 by age 65. Start by making some assumptions about your salary. Next, compute the percent of your salary that you will be able to save each year. If you will receive any lump-sum monies, include those amounts in your calculations. Historically, stocks have delivered average annual returns of around 10%. Given this history, you probably should not assume that you will earn above 10% on the money you invest. It is not necessary to specify exactly what types of assets you will buy for your investments; just assume a rate you expect to earn. Use the future value tables in eAppendix B to calculate how your savings will grow. Experiment a bit with your figures to see how much less you have to save if you start at, for example, age 25 versus age 35 or 40. (For this assignment, do not include inflation in your calculations.)
BTN 13-6 You are to devise an investment strategy to enable you to accumulate $1,000,000 by age 65. Start by making some assumptions about your salary. Next, compute the percent of your salary that you will be able to save each year. If you will receive any lump-sum monies, include those amounts in your calculations. Historically, stocks have delivered average annual returns of around 10%. Given this history, you probably should not assume that you will earn above 10% on the money you invest. It is not necessary to specify exactly what types of assets you will buy for your investments; just assume a rate you expect to earn. Use the future value tables in eAppendix B to calculate how your savings will grow. Experiment a bit with your figures to see how much less you have to save if you start at, for example, age 25 versus age 35 or 40. (For this assignment, do not include inflation in your calculations.)
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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Question on attachement BTN 13-6
Transcribed Image Text:HITTING THE ROAD E ci L P3
BTN 13-6 You are to devise an investment strategy to enable you to accumulate $1,000,000 by age 65. Start by making
some assumptions about your salary. Next, compute the percent of your salary that you will be able to save each year. If you
will receive any lump-sum monies, include those amounts in your calculations. Historically, stocks have delivered average
annual returns of around 10%. Given this history, you probably should not assume that you will earn above 10% on the money
you invest. It is not necessary to specify exactly what types of assets you will buy for your investments; just assume a rate you
expect to earn. Use the future value tables in L Appendix B to calculate how your savings will grow. Experiment a bit with
your figures to see how much less you have to save if you start at, for example, age 25 versus age 35 or 40. (For this
assignment, do not include inflation in your calculations.)
Transcribed Image Text:f = (1+ i)"
Rate
Periods
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
12%
15%
Perio
1.0000 1.0000 1.0000
1.0000 1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1
1.0100
1.0200 1.0300 1.0400 1.0500
1.0600
1.0700
1.0800
1.0900
1.1000
1.1200
1.1500
1
1.0201
1.0404 1.0609 1.0816
1.1025
1.1236
1.1449
1.1664
1.1881
1.2100
1.2544
1.3225
1.0303
1.0612
1.0927
1.1249
1.1576
1.1910
1.2250
1.2597
1.2950
1.3310
1.4049
1.5209
1.0406 1.0824
1.1255
1.1699
1.2155
1.2625
1.3108
1.3605
1.4116
1.4641
1.5735
1.7490
4
1.0510
1.1041
1.1593
1.2167
1.2763
1.3382
1.4026
1.4693
1.5386
1.6105
1.7623
2.0114
5
6
1.0615
1.1262
1.1941
1.2653
1.3401
1.4185
1.5007
1.5869
1.6771
1.7716
1.9738
2.3131
6.
7
1.0721
1.1487
1.2299
1.3159
1.4071
1.5036
1.6058
1.7138
1.8280
1.9487
2.2107
7
2.6600
8
1.0829
1.1717
1.2668 1.3686 1.4775
1.5938
1.7182
1.8509
1.9926
2.1436
2.4760
3.0590
8.
9
1.0937
1.1951
1.3048 1.4233
1.5513
1.6895
1.8385
1.9990
2.1719
2.3579
2.7731
3.5179
9
10
1.1046
1.2190
1.3439 1.4802 1.6289
1.7908
1.9672
2.1589
2.3674
2.5937
3.1058
4.0456
10
11
1.1157
1.2434
1.3842 1.5395
1.7103
1.8983
2.1049
2.3316
2.5804
2.8531
3.4785
4.6524
11
12
1.1268
1.2682 1.4258 1.6010
1.7959
2.0122
2.2522
2.5182
2.8127
3.1384
3.8960
5.3503
12
13
1.1381 1.2936 1.4685 1.6651 1.8856
2.1329
2.4098
2.7196
3.0658
3.4523
4.3635
6.1528
13
14
1.1495
1.3195
1.5126
1.7317
1.9799
2.2609
2.5785
2.9372
3.3417
3.7975
4.8871
7.0757
14
15
1.1610
1.3459 1.5580 1.8009 2.0789
2.3966
2.7590
3.1722
3.6425
4.1772
5.4736
8.1371
15
16
1.1726
1.3728 1.6047 1.8730 2.1829
2.5404
2.9522
3.4259
3.9703
4.5950
6.1304
9.3576
16
17
1.1843
1.4002 1.6528 1.9479
2.2920
2.6928
3.1588
3.7000
4.3276
5.0545
6.8660
10.7613
17
18
1.1961
1.4282 1.7024 2.0258 2.4066
2.8543
3.3799
3.9960
4.7171
5.5599
7.6900
12.3755
18
19
1.2081
1.4568
1.7535
2.1068 2.5270
3.0256
3.6165
4.3157
5.1417
6.1159
8.6128
14.2318
19
20
1.2202
1.4859 1.8061
2.1911
2.6533
3.2071
3.8697
4.6610
5.6044
6.7275
9.6463
16.3665
20
25
1.2824 1.6406 2.0938 2.6658 3.3864
4.2919
5.4274
6.8485
8.6231 10.8347 17.0001
32.9190
25
30
1.3478
1.8114
2.4273 3.2434 4:3219
5-7435
7.6123 10.0627
13.2677 17.4494 29.9599
66.2118
30
35
1.4166
1.9999 2.8139 3.9461 5.5160
7.6861 10.6766 14.7853 20.4140 28.1024 52.7996 133.1755
35
40
1.4889 2.2080 3.2620 4.8010 7.0400 10.2857 14.9745
21.7245 31.4094 45.2593 93.0510 267.8635
40
Used to compute the future value of a known present amount. For example: What is the accumulated value of $3,000 invested today at 8% compounded quarterly for.
years? Using the factors of n = 20 and i = 2% (20 quarterly periods and a quarterly interest rate of 2%), the factor is 1.4859. The accumulated value is $4,457-70 ($3,00
1.4859).
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