Godfred & Sam are both at 40. At 20, Sam started saving GH¢100 per month at a bank that pays him 10% per annum towards his retirement. 10 years later Godfred opened a similar account, except that his contributions were GH¢200 at the end of each month also towards his retirement. Would you rather be Sam or Godfred

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
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  1. Godfred & Sam are both at 40. At 20, Sam started saving GH¢100 per month at a bank that pays him 10% per annum towards his retirement. 10 years later Godfred opened a similar account, except that his contributions were GH¢200 at the end of each month also towards his retirement. Would you rather be Sam or Godfred?
  2. Your older brother turned 35 today, & he is planning to save GH¢7,000/year for retirement, with the first deposit to be made one year from today. He will invest in a mutual fund that's expected to provide a return of 7.5%/year. He plans to retire 30 years from today, when he turns 65, & he expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can he spend each year after he retires? His first withdrawal will be made at the end of his first retirement year
  3. You want to endow a chair for a female professor of finance at your alma mater. You’d like to attract a prestigious faculty member, so you’d like the endowment to add $100,000 per year to the faculty member’s resources (salary, travel, databases, etc.)  If you expect to earn a rate of return of 4% annually on the endowment, how much will you need to donate to fund the chair?
  4. You want to begin saving for your retirement. You plan to contribute $12,000 to the account at the end of this year.  You anticipate you will be able to increase your annual contributions by 3% each year for the next 45 years.  If your expected annual return is 8%, how much do you expect to have in your retirement account when you retire in 45 years?
  5. If current interest rate is 28%, a Treasury Bill with 91 days to maturity, and a face value of GH¢ 50,000 should have a market value of?
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