Dick Eckel recently set up a TDA to save for his retirement. He arranged to have $125 taken out of each of his biweekly checks; it will earnhis ordinary annuity comes to term when he is 65. (Round your answers to the nearest cent)(a) Find the present value of the given annuity$1110058.3613 X(b) Interpret the present value of the given annuity.You would have to invest a lump sum of $ 117000X now instead of $125 biweekly.interest. He just had his twenty-ninth birthday, and

Present value is the equivalent today based on the time and interest rate of future cash flow that…

Answered: Eckel recently set up a TDA to save for…

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 friend Anne is planning to invest $500 each year for five years and will earn a rate of 5.5 percent per year. a) Determine the future value of this annuity due if her first $500 is invested now. Show your work.b) What is the difference between an annuity due and an ordinary annuity? Explain.
Will Smith will receive $80,000 5 years from now, from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded semiannually), what is the present value of this amount today?
Find the future value of each using the future value of an ordinary annuity formula. Shelly deposits the $2,000 she got as a birthday gift from her grandmotherinto an account earning 3.6% interest compounded monthly. She decides to also deposit $200 at the end of each month into the same account. How much will be in the account in 10 years? Julian won the lottery! He deposits some of his winnings intoan account earning 2.75% interest compounded quarterly. He makes his deposit of $25,000 and also decides to start making deposits of $1,000 into the same account at the end of each quarter. How much will he have after 5 years?
(Future value of an annuity) Upon graduating from college 35 years ago, Dr. Nick Riviera was already planning for his retirement. Since then, he has made deposits into a retirement fund on a semiannually basis in the amount of $900. Nick has just completed his final payment and is at last ready to retire. His retirement fund has earned 7 percent compounded semiannually. Use five decimal places for the periodic interest rate in your calculations. a. How much has Nick accumulated in his retirement account? b. In addition to this, 20 years ago Nick received an inheritance check for $20,000 from his beloved uncle. He decided to deposit the entire amount into his retirement fund. What is his current balance in the fund?
(Related to Checkpoint 6.2) (Present value of an ordinary annuity) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income. The annuities are as follows: Annuity A Purchase Price of the Annuity (Att 0) $40,000 B $60,000 C $60,000 (Click on the icon in order to copy its contents into a spreadsheet.) Amount of Money Received Per Year $6,500 $9,000 $8,000 Duration of the Annuity (Years) 15 18 20 Nicki could earn 11 percent on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 11 percent? a. If Nicki could earn 11 percent on her money, what is the present value of annuity A with $6,500…
Using a scientific calculator Mr and Mrs Gonzales set up a TDA to save for their retirement. They are having $100 deducted from Mrs. Gonzales's biweekly checks which will earn 8 1/8% interest. Find the future value of their ordinary annuity if it comes to term after they retire in 35.5 years.
Your grandparents would like to establish a trust fund that will pay you and your heirs $175,000 per year forever with the first payment one year from today. If the trust fund earns an annual return of 3.4 percent, how much must your grandparents deposit today?
The Wright family wants to save money to travel the world. They purchase an annuity with a yearly payment of s480 that earns 4% interest, compounded annually. Payments will be made at the end of each year. Find the total value of the annuity in 14 years. Do not round any intermediate computations, and round your final answer to the nearest cent. If necessary, refer to the list of financial formulas.
Your uncle is about to retire, and he wants to buy an annuity that will provide him with $7,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?
Dean Gooch is planning for his retirement, so he is setting up a payout annuity with his bank. He wishes to receive a payout of $1,700 per month for twenty five years. His money earns 7.3% interest compounded monthly. (Round your answers to the nearest cent.) (a) How large a monthly payment must Dean Gooch make if he saves for his payout annuity with an ordinary annuity, which he sets up thirty years before his retirement? (The two annuities pay the same interest rate.) (b) How large a monthly payment must he make if he set the ordinary annuity up twenty years before his retirement?
The Good Fairy has offered to give you $1,000,000 in 20 years. She has volunteered to deposit the present value of the $1,000,000 in a trust managed by a bank or insurance company of your choice. How much must the Good Fairy deposit if the investment earns annual compounding interest of 5 percent?

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