In three years, Bernie Slight wants to have $15,000 for a down payment on a house. He is going to save some of his salary each year for the next three years. At the end of each year, he will deposit the money into an account paying 8% interest. Because his salary is increasing, he plans on saving twice as much in the second year than in the first year and three times as much in the third year than in the first year. How much will he need to save this first year to achieve his goal?

In three years, Bernie Slight wants to have $15,000 for a down payment on a house. He is going to save some of his salary each year for the next three years. At the end of each year, he will deposit the money into an account paying 8% interest. Because his salary is increasing, he plans on saving twice as much in the second year than in the first year and three times as much in the third year than in the first year. How much will he need to save this first year to achieve his goal?

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 wealthy great aunt is going to help you finance the purchase of your first condo. She will lend you $80,000 today. You agree to pay her 5 equally sized payments. The first payment will be 1 year from today, and 4 more payments will follow every 3 years (so payments at the end of years 1, 4, 7, 10, and 13). If the interest rate she charges is 2.00% per year, how much will each payment be?
Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 25 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of 2.8%. (a) She wants her first payout to have the same purchasing power as does $14000 today. How big should that payout be if she assumes inflation of 2.8% per year? (b) How much money must she deposit when she is 65 if her money earns 8.1% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 30 before starting her ordinary annuity?
You plan to buy property in Florida 8 years from today. To do this, you estimate that you will need $ 45000 at that time for the purchase. You would like to accumulate these funds by making equal annual deposits into your savings account, which pays 9% annually. If you make your first deposit at the end ofthis year, and you would like your accountto reach$ 45000 when the final deposit is made, what amount do you need to deposit annually?
I want to be able to withdraw $40,000 from my account each year for 30 years after I retire. I expect to retire in 15 years. If my account earns 4% interest, how much will I need to deposit each year until retirement to achieve my goals?
Sean plans to invest $10,000 in a savings account that pays 1.5% compounded quarterly. His friend suggests that he invest in an account paying the same interest rate but that pays interest compounded monthly. How much more interest will he earn at the end of 10 years if he follows his friend's advice?
A.)Your client has recently had a baby girl. He wants to set aside his annual bonus at the end of each year to pay her college costs in 18 years. He expects his bonus to be $5,000 per year and thinks he can earn 6% per year. How much will he have saved at the end of 18 years? B.) How much will he have saved at the end of 18 years if his bonus is received at the beginning of each year?
You receive a $5,000 check from your grandparents for graduation. You decide to save it toward a down payment on a house. You invest it earning 8% per year and you think you will need to have $10,000 saved for the down payment. How long will it be before the $5,000 has grown to $10,000 ? To double the money you received from your grandparents, it will take years. (Round to one decimal place.)
Pueblo starts his account with the amount of $8,000. he add $100 each month. the account earns 7.1% interest, compounded monthly. The investment will last him for about 41 years. Pubelo thinks that beyond the $100 that he add each month, how much additional monthly payment will he need to add in order for the account to end with $770,000 after 41 years.
At the end of 5 years from now, your friend wants to have $225, 000 saved for a down payment on a house. He expects to earn 5%-compounded monthly-on his investments over the next 5 years. How much would your friend have to put in his investment account each month to reach his goal?
Angela wishes to buy a boat in five years that presently costs $150,000. She expects the cost of the boat to increase due to inflation by 3% per year for the next two years and 4% per year the following three years. She also wants to spend $50,000 per year for 6 years beginning at the end of 10 years from today. How much must she save each year for the next 5 years if she can earn 6% on her investments? a. $66,302.67 b. $64,347.13 c. $65,946.95 d. $61,349.81 e. None of these are correct
Bobby has heard the importance of saving early for retirement. He wants to retire in 35 years. But he really likes traveling. Right now, he spends, on average, about $600 a month traveling. He is trying to decide if he should start saving his travel money for retirement now, or if he can continue traveling a few more years before beginning to save. Assume that he can find an annuity that pays 4.75% compounded quarterly. What is his future value if: a) He waits 20 years to start saving? N: P/Y: I%: C/Y: PMT: End or Begin $201,091.59 $658,935.54 $823,669.42 $1,000,000.00
Bob wants to retire in 15 years, and he wants his savings to be enough to provide the same buying power as an amount of 500,000 could provide today. He believes that inflation will cause prices to increase by 6% each year over the next 15 years, and that his investments will earn an annual effective rate of return of 4%. He can save $500 at the end of every month the first year, and he plans to increase the deposits yearly by a constant percent. Assuming that his estimates of 6% annual inflation and 4% return rate are correct, what percent annual increase in his savings rate will help him reach his goal?

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