Chip and Karla are parents of a young child. They expect their child to attend college exactly 13 years from today, andthey wish to have accumulated the amount of $124000 when their child reaches college. In order to meet their goal,they will begin making MONTHLY contributions to a special account devoted to the retirement goal. Contributions to thisaccount will begin one month from today, and will continue placing equal monthly amounts into her retirement accountfor the next 13 years. What minimum amount needs to be placed in the college savings account at the end of eachmonth so that they will reach their goal if the annual interest rate is 4.80%. $

TVM refers to the concept that considers the effect of money's interest-earning capacity, which…

Answered: Chip and Karla are parents of a young…

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

See similar textbooks

Similar questions

Your son Bob is 14 years old today. You are planning for his college education. Bob will start school on his 19th birthday. You wish to set aside some money early to send Bob to four years of school. You have decided that you will give Bob $15,000 per year for each of his first two years of college, and $20,000 per year for each of his last two years of college. You will give these amounts to Bob at the beginning of each school year. You will make 5 equal annual deposits to fund the account. The first payment will be made one year from today and the last payment will be made the day Bob leaves for college. You wish to have just enough money in the bank to fund Bob's entire education on the day that he leaves for school. Any money that is in the aCcount will continue to earn interest while Bob is in school. Because of a new program, the bank has agreed to give you a 10 percent, nominal compounded annually, return on your investments throughout the entire time period. How much do you…
Today is Janet's 23rdbirthday. Starting today, Janet plans to begin saving for her retirement. Her plan is to contribute $3,000 to a brokerage account each year on her birthday. Her first contribution will take place today. Her 42ndand final contribution will take place on her 64th birthday. Her aunt has decided to help Janet with her savings, which is why she gave Janet $10,000 today as a birthday present to help get her account started. Assume that the account has an expected annual return of 14 percent. How much will Janet expect to have in her account on her 65th birthday? Round your answer to a whole dollar; for example 2345.
Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Asia Omar. Ms. Omar by contract will retire at the end of exactly 15 years. During her retirement, she is entitled to receive an annual end-of-year payment of $50,000 for exactly 25 years. If she dies prior to the end of the 25-year period, the annual payments will pass to her heirs. Also, sunrise want to assure a stability life for Asia Omar and her family. Thus, they want to have a perpetuity which provide $15,000 each year (after the 25 year of retirement). During the 15-year “still working period” Sunrise wishes to fund the annuity by making equal annual end-of-year deposits into an account earning 9% interest. Once the 25-year “retirement period” begins, Sunrise plans to move the accumulated monies into an account earning a guaranteed 12% per year. After the 40th year, (after retirement) the interest rate will be 15%. Note that all transaction will happen at the end…
Irene plans to retire on December 31st, 2019. She has been preparing to retire by making annual deposits, starting on December 31st, 1979, of $2450 into an account that pays an effective rate of interest of 9.1%. She has continued this practice every year through December 31st, 2000. Her goal is to have $1.5 million saved up at the time of her retirement. How large should her annual deposits be (from December 31st, 2001 until December 31st, 2019) so that she can reach her goal? Payment = $68573.5
A woman is planning for retirement in 30 years and decides she can deposit $6,000 each year on December 31 into a retirement savings plan that she expects will pay 6% interest. In 20 years she also expects to receive a small inheritance of $12,000 that she can also put into her retirement fund. The woman anticipates that her retirement fund will need to last 20 years; she estimates that she will need $60,000 at the end of each year in retirement to cover her living expenses. Her plan is flawed. How much extra does she need to save every year (rounded to dollars and cents) to achieve her goals? (Do not round interim calculations)
Suzy wants to retire in 30 years. She expects to live 25 years after retirement. She prepares a savings plan to meet the objectives: First, after retirement she would like to be able to withdraw $20,000 per month. The first withdrawal will occur at the end of the first month after retirement. Second, she would like to leave her daughter a $500,000 inheritance. Lastly, she wants to set up a fund that will pay $5000 per month forever to her favorite charity after she dies. These payments will begin one month after she dies. All the monies earn 10% annual rate compounded monthly. How much will she have to save per month to meet these objectives? She wishes to make her first deposit from now and the last deposit on the day she retires.
A grandfather agrees to start contributing $2,500.00 to an educational savings account starting with the 8th birthday of his granddaughter. His last payment is on her 18th birthday at which point she starts a 4 year college program. How much can she afford drawing from this account at the end of each study year until she graduates? The account makes 5.5% per year.
Hamza and Khalifa have been best friends since high school. They have recently learnt about the concept of superannuation, and are now both planning their retirement early. Both Hamza and Khalifa would like to have $2 million at the age of 60, each, when they retire. Hamza plans on depositing equal annual amounts into his superannuation fund on each birthday, starting at the age of 21, and ending at the age of 60 (that includes a deposit on the 60th birthday as well). Khalifa, however, starts making deposits into his superannuation fund on his 30th birthday and plans to deposit equal annual amounts on each birthday until he turns 60 (that includes a deposit on the 60th birthday as well). If the investment funds earn 10% per year, calculate the amounts the Hamza and Khalifa respectively will have to save each year to meet their retirement goals. Comment on the difference.
Manya and Sarah are both starting out in their careers. They choose two different paths to saving in their 401k accounts for their retirements. Manya is 23 years old and decides to start depositing $500 monthly in her 401k which will earn 7.6% APR. Manya will retire at the age of 67. a) How many years will Manya be saving money in her 401k? years b) How much will be in Manya's 401k when she retires? $ c) How much will Manya have deposited herself over her years of working from her salary? d) How much will Manya have earned in interest over her years of working? Sarah waits to begin depositing money into a 401k (for various reasons that seemed important at the time...) until she was 45 years old. She decides to deposit twice as much as Manya per month hoping to catch up. Assume that Sarah gets the same 7.6% APR and will retire at the same age of 67. e) How many years will Sarah be saving money in her 401k. years f) How much will Sarah be depositing in her account each month? g) How much…
The Ali plan to retire and start receiving their Social Security benefits at the same time, when Jimmy is 67 and Lucy is 62 years old. Their monthly Social Security retirement benefits at those ages in today's dollars are estimated to be $3,200 for Jimmy and $2,000 for Lucy. They think their expenses in retirement in today's dollars will be 70% of their total cash outflows now. Other than Social Security, they will rely on their retirement savings in order to meet their retirement expenses. They want to assume they will die in the same year, when Jimmy is 95 and Lucy is 90 years old.Determine what the payments will be in the distribution phase. These will be the withdrawals Jimmy and Lucy will need to take monthly from their accounts, in order to meet their retirement expenses. How much is that monthly amount?Note: this question is asking about the withdrawals they will need, not about the expenses they will be incurring monthly.
Two friends, Alysha and Betty, are planning for their retirement. Both are 20 years old and plan on retiring in 40 years with $1,000,000 each. Betty plans on making annual deposits beginning in one year (total of 40 deposits) while Alysha plans on waiting and then depositing twice as much as Betty deposits. If both can earn 4.20 percent per year, how long can Alysha wait before she has to start making her deposits? (Round answer to 2 decimal places, e.g. 125. Do not round your intermediate calculations.) Alysha can wait for years
Andrew deposits $306.06 each month into an annuity account for his child's college fund in order to accumulate a future value of $80,000 in 16 years. How much of the $80,000 will Andrew ultimately deposit in the account, and how much is interest earned? Round your answers to the nearest cent, if necessary.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS