Maxwell has been offered a choice by his employer of $2,000 paid annually at the beginning of the year for the next 15 years or a one-time lump sum payment.Norman has been earning 9% on his investments and projects to continue. What lump sum would be sufficient for him to forego the stream of payments?$15.894.31$17,572.30$16,228.31$15,209.88

We can use the PV of annuity due formula to determine the PV of all future annual payment. The…

Answered: Maxwell has been offered a choice by…

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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A client, age 50, who is currently earning $100,000 per year, wishes to retire in 15 years with a fixed annual retirement income of $125,000. The client expects to live 25 years in retirement and is comfortable assuming a rate of return of 8% and inflation of 3%. What is the capital amount required at the onset of retirement to support the client’s retirement income? a) $1,441,095 b) $1,874,532 c) $2,336,367 d) $1,334,347
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Ralphearns $200, 000 per yearat Virtual Reality Solutions LLC,where he has worked for 10years. Virtual Reality Solutionssponsors a defined benefit planequal to 2% per year of service ofthe employees finalcompensation. At the currenttime, what is Ralph's retirementpayable from the defined benefitplan? a. )$40, 000 per year b.)$4, 000 per month or $48, 000 peryear c.)$20, 000 per year d.)$100, 000 per year
Kathy has an account balance in her employer’s money purchase pension plan of $1,000. The plan has a 2-6 graded vesting policy. She has been a participant for three and a half years and has worked for the company for five years. Assuming the plan permits loans, what is the maximum loan that Kathy could take from the plan? $20,000 $30,000 $40,000 $50,000
Linda's salary is $49000 a year. As a part of it's incentive program the company decides to give her a raise of $1000 every year. What is the discounted value of her income for the next 11 years at j₁ = 6.2%? To keep things simple, assume Linda is paid her entire salary at the end of each year. Answer: $
Charlie has $8,000 to invest for a period of 5 years. The following three alternatives are available to him: • Account 1 pays 4.00% for year 1, 5.00% for year 2, 8.00% for year 3, 9.00% for year 4, and 10.00% for year 5, all with annual compounding. • Account 2 pays 10.00% for year 1, 9.00% for year 2, 8.00% for year 3, 5.00% for year 4, and 4.00% for year 5, all with annual compounding. • Account 3 pays interest at the rate of 7.17490% per year for all 5 years. Based on the available balance at the end of year 5, which alternative is Charlie's best choice? No alternative is better than the others Year 5 Balance, Alternative 1: $ 126 Year 5 Balance, Alternative 2: $ 126 Year 5 Balance, Alternative 3: $ 126 Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.
Paul intends to retire in 15 years and would like to receive $1,500 every month for 20 years, starting at the end of the first month in which he retires. How much must he have at the beginning of retirement if interest is 5% compounded annually? Select one: a. $191,834.03 b. $229,415.16 c. $228,235.00 d. $227,287.97 e. $230,349.83
Timothy is retiring from his job soon at which time his employer will make the following offer: 1. A lumpsum amount of $200,0002. A sum of $15,000 at the beginning of each year 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?
Charlie has $14,000 to invest for a period of 5 years. The following three alternatives are available to him: • Account 1 pays 6.00% for year 1, 9.00% for year 2, 11.00% for year 3, 13.00% for year 4, and 15.00% for year 5, all with annual compounding. • Account 2 pays 15.00% for year 1, 13.00% for year 2, 11.00% for year 3, 9.00% for year 4, and 6.00% for year 5, all with annual compounding. • Account 3 pays interest at the rate of 10.75576% per year for all 5 years. Based on the available balance at the end of year 5, which alternative is Charlie's best choice? Alternative 2 Year 5 Balance, Alternative 1: $ Year 5 Balance, Alternative 2: $ Year 5 Balance, Alternative 3: $ 3.123.14 4.380.38 1506
Your employer contributes $500 per month, at the beginning of each month, to a retirement fund on your behalf. The contributions earn interest at a rate of 6% per year, compounded monthly. At the end of twenty years, what will be the balance of the fund? Group of answer choices $69,790 $232,175 $70,139 $220,713 $231,020
F2

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