Personal Finance Problem Accumulating a growing future sum You have $30,000, and you are making the de cision between consumption and investment. You are considering either using all of the money to buy a new car or investing the whole amount. You have two invesi. ment options: You can either put the money into a savings account with a nominal interest rate of 5% compounded monthly, or invest the money in stocks with an er. pected return of 6% compounded continuously. a. If you choose to invest, how much will you have 6 years latet if you invested in (1) the savings account, or (2) stocks? b. If you invested in the savings account, how lohg will it take for you to double your money? c. Suppose the price of the car inflates by 2% per year. If you choose to invest your money in stocks, how long will it take for you to be able to afford 2 cars?

Personal Finance Problem Accumulating a growing future sum You have $30,000, and you are making the de cision between consumption and investment. You are considering either using all of the money to buy a new car or investing the whole amount. You have two invesi. ment options: You can either put the money into a savings account with a nominal interest rate of 5% compounded monthly, or invest the money in stocks with an er. pected return of 6% compounded continuously. a. If you choose to invest, how much will you have 6 years latet if you invested in (1) the savings account, or (2) stocks? b. If you invested in the savings account, how lohg will it take for you to double your money? c. Suppose the price of the car inflates by 2% per year. If you choose to invest your money in stocks, how long will it take for you to be able to afford 2 cars?

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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Time Value of Money
Interest Rate? Problem 2 In 4 years, you plan to buy a new car and will need a down payment. How much would you need to invest today in order to have $8,000 in 4 years? Assume interest rates are 4%. Which table will you use for the above calculation? Number of periods? Factor? hapter What is the amount of investment? Problom 3 value of money and Бопа X A P Q S Y
Question 3 You are considering to invest in a savings plan. The plan offers a rate of return of 8 percent per year. The plan requires youto save RM1,500, RM1,250, and RM6,400 at the end of each year for the next three years, respectively, how much do you need to savetoday?Select one:A. RM11.623B. RM7 203C. RM8,449D. RM7.541
1) What is the loanable funds market? 2) Calculate the following: You save $100 and want to see how much you will earn based on the following interest rates Interest Rate Value after 1 month -1% ? 0.5% ? 1% ? 2% ? 3) What supply factors affect the Loanable Funds market? 4) What demand factors affect the Loanable Funds market?
Suppose you plan to have $90,000 in 15 years from now and you can invest your savings at 2% compounded continuously. Assuming you can save the same amount of money each year, how much do you need to save on a yearly basis in order to achieve your goal? Hint: Treat your savings as an income stream. Yearly savings (exact value) = Yearly savings (rounded to the nearest cent) = Submit Answer dollars dollars
Value of a retirement annuity Personal Finance Problem An insurance agent is trying to sell you an annuity, that will provide you with $5,100 at the end of each year for the next 30 years. If you don't purchase this annuity, you can invest your money and earn a return of 5%. What is the most you would pay for this annuity right now? Ignoring taxes, the most you would pay for this annuity is S. (Round to the nearest cent.)
Based on the framework in the previous two problems, you have found that you need to have a total of $1,529,499 in savings at the time you retire, in 40 years. You currently only have $28,118 saved up in your retirement accounts. If you anticipate that your 80/20 investment portfolio will return an average of 8.31% per year, how much extra must you save every year to reach your goal? Assume that you'll be saving the extra amount by the end of each year.
How You deposit $1,900 into an account that. pays 7⁰% per year. Your plan is to withdraw this amount at the end of 5 years to use for a down payment on a new car. much will you be able to withdraw at the end of 5 years? Do not round intermediate calculations. Rand your answer to the nearest cent. 12 Today you invest a lump sum amount in an equity find that provides on 12% annual return. You would like to have $11,500 in 6 years to help with a down payment for a home How much do you need to deposit today to reach your $11, 500 goal? Do not round intermediate calculations. Round to the nearest cent your answer
The amount the bank is willing to loan you to start your business is not enough to cover the initial investment you need to make. You need an additional $10,000. You approach an investor and ask him to invest $10,000 in your business. In return, you offer to pay him $500 out of your profits at the end of years 1-4 and an amount X at the end of year 5. The investor's annual cost of funds is 10%. How big must X be to induce him to invest in your business?
How much will you need to invest today to get the following cash flows at a discount rate of 8.25%: Y1: $1,500 Y2: $1,700 Y3: $2,500 b) What is the total value of the cash flows given in (a) at the end of 3 years at a discount rate of 6.2 %? c) Alfred has the option of choosing between two savings accounts one with which pays 7.15% with quarterly compounding and another with 7% with monthly compounding. Which account should he use? Please answer fast I give you upvote
Suppose you have $10,000 and a choice of two alternatives: A) put the money in a savings account that pays 4% per year, and B) buy a stock that has a 50% chance to gain 15% in value after 1 year, and a 50% chance to lose 5%. What will be the expected return for either alternative, and which one would you choose? Why?
3. A man desires to have P3M money in his savings when he retires after 25years. This has amount in the present purchasing power. If the expected averageinflation rate is 7% per year and the savings earns 5.5%, what lump sum ofmoney should he invest now?

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