Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%. Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149. a. When f=3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80? b. Repeat Part (a) when inflation averages 1% per year. Click the icon to view the interest and annuity table for discrete compounding when i=1% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 3% per year. a. The purchasing power is S thousand. (Round to the nearest whole number.) b. The purchasing power is $ thousand. (Round to the nearest whole number.)

Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%. Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149. a. When f=3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80? b. Repeat Part (a) when inflation averages 1% per year. Click the icon to view the interest and annuity table for discrete compounding when i=1% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 3% per year. a. The purchasing power is S thousand. (Round to the nearest whole number.) b. The purchasing power is $ thousand. (Round to the nearest whole number.)

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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You are valuing an investment that will pay you $26,000 per year for the first 4 years, $36,000 per year the next 11 years, $49,000 per year the next 17 years, and $45,000 per year the following 10 years (all payments are at the end of each year). If the appropriate annual discount rate is 6.00%, what is the value of the investment to you today?
You plan to retire in 20 years. You would like to maintain your current level of consumption which is $55,937 per year. You will need to have 38 years of consumption during your retirement. You can earn 5.52% per year (nominal terms) on your investments. In addition, you expect inflation to be 2.09% inflation per year, from now and through your retirement. How much do you have to invest each year, starting next year, for 13 years, in nominal terms to just cover your retirement needs?
You plan to retire in 20 years. Use present value tables to calculate whether it is better for you tosave $25,000 a year for the last 10 years before retirement or $15,000 for each of the 20 years.Assume you are able to earn 10 percent interest on your investments. Round to the nearest dollar.
Suppose you invest $210,000 in an annuity that returns 6 annual payments, with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment you receive? Equivalent problem structure (as a borrower): Suppose you borrow $210,000 to be paid back over 6 years with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment? Please round your answer to the nearest hundredth.
Suppose you plan to have $70,000 in 25 years from now and you can invest your savings at 6% compounded continuously. Assuming you can save the same amount of money each year, how much do you need to save on a yearly basis in order to achieve your goal? Hint: Treat your savings as an income stream. Yearly savings (exact value) =________ dol Yearly savings (rounded to the nearest cent) = _____dollars
After some calculations, you realize that your inflation - adjusted retirement income shortfall is $44, 244 per year. You anticipate that once you retire, you will be retired for 36 years. How much at a minimum should you have saved at the time of your retirement, if you estimate that your 60/40 equity/debt retirement portfolio will have a real (net of inflation) return of 5.29% on average? For simplicity, assume that once you retire you will be withdrawing the necessary amount from your portfolio at the end of each year.
Suppose that you just turned 25, plan to retire at 65, and estimate that you will need $9,049 per month at the end of each month upon retirement for the next 30 years. How much do you need to contribute at the end of each month until you reach age 50? Assume your estimated return is 8.8% EAR, that you have $10,000 already invested, and the funds will continue to earn interest to age 65, even though you will not continue contributing after age 50.
Assume that you plan to retire 40 years from now and that you expect to need $2M to support the lifestyle that you want. (a) If the interest rate is 10%, is the following statement approximately true? “Waiting 5 years to start saving doubles what you must deposit each year.” (b) If the interest rate is 12%, is the required multiplier higher or lower than for the 10% rate in (a)? (c) At what interest rate is the following statement exactly true? “Waiting 5 years to start saving doubles what you must deposit each year.”
You have just celebrated your twentieth birthday and you believe you will spend Rs 120,000 a year for 20 years once you retire at the age ofsixty. If the interest rate is 10% per annum, how much must you save each year until retirement to support your consumption pattern after retirement? Assume that annual savings start one year from now.
You are trying to decide how much to save for retirement. Assume you plan to save $4,000 per year with the first investment made one year from now. You think you can earn 10.5% per year on your investments and you plan to retire in 36 years, immediately after making your last $4,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $4,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 10.5% in retirement)? d. If, instead, you decide to withdraw $270,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it…
You want to receive $5000 per month for 20 years in real dollars in an account when you retire in 35 years. The first monthly payment to be received 1 month after you retire. The nominal return on your investment is 9.94 percent and the inflation rate is 3.2 percent. What is the real amount you must deposit each year for 35 years to achieve your goal? Pls do using Excel
Suppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9 percent. What is the future value if the payments are made on the last day of the year? What if the payments are made on the first day of the year? a) $82,756.68; $90,204.78 b) $90,204.78; $82,756.68 c) $49,345.10; $53,786.16 d) $53,786.16; $49,345.10

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