ll computations must be done and shown manually. Timothy is retiring from his job soon at which time his employer will make the following offer: A lump sum amount of $200,000 A sum of $15,000 at the beginning of each month for the next 25 years. If the average interest rate is likely to be 5.5% p.a. for the next 25 years, which option should Timothy choos
All computations must be done and shown manually.
Timothy is retiring from his job soon at which time his employer will make the following offer:
- A lump sum amount of $200,000
- A sum of $15,000 at the beginning of each month for the next 25 years.
If the average interest rate is likely to be 5.5% p.a. for the next 25 years, which option should Timothy choose?
Question 2
You are contemplating investing some surplus funds and the following options are available:
- Invest $50,000 @ 4% p.a. compounded annually for 5 years.
- Invest $45,000 @ 3% p.a. compounded quarterly for 5 years.
- Invest $40,000 @ 4.5% p.a. compounded semi-annually for 5 years.
- Invest $50,000 @ 3% p.a. compounded semi-annually for 5 years.
- Invest $55,000 @ 0.5% p.a. compounded weekly for 5 years
Which one of the above is the second-best option?
Question 3
You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100,000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a.
How much should you save in an interest-bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100,000 every year for 30 years after retirement? Assume that the interest in the interest-bearing account is compounded monthly.
Question 4
Complete the following table and draw a graph showing how
|
Years remaining to maturity |
BOND A Coupon. rate = 8% p.a. Market interest rate = 6% p.a. |
BOND B Coupon rate = 6% p.a. Market interest rate = 6% p.a. |
BOND C Coupon rate = 4% p.a. Market interest rate = 6% p.a. |
|
10 |
|
|
|
|
9 |
|
|
|
|
8 |
|
|
|
|
7 |
|
|
|
|
6 |
|
|
|
|
5 |
|
|
|
|
4 |
|
|
|
|
3 |
|
|
|
|
2 |
|
|
|
|
1 |
|
|
|
|
0 |
|
|
|
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
