Suppose the stated annual interest rate is 6%. For Mike who is age 25 now and will receive a monthly wage of HK$15,000 till retirement at age 65, What is the present value (at age 25) of Mike's total contribution to the program and what is the present value (at age 25) of Mike's future total benefit from the pension (suppose he will die at age 85)? Compare these two present values and draw your conclusion.

Suppose the stated annual interest rate is 6%. For Mike who is age 25 now and will receive a monthly wage of HK$15,000 till retirement at age 65, What is the present value (at age 25) of Mike's total contribution to the program and what is the present value (at age 25) of Mike's future total benefit from the pension (suppose he will die at age 85)? Compare these two present values and draw your conclusion.

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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Similar questions

Explain well with proper answer.
Assume that you contribute $150 per month to a retirement plan for 20 years. Then you can increase the contribution to $258 per month for another 20 years, and finally, $408 per month for the last 10 years. Given a 7 percent interest rate, what is the value of your retirement plan after the 50 years?
What is the present value of a perpetuity that pays $50 annually and has an annual rate of return of 17%? note: round and show your answer to the nearest dollar.
You are considering two investment options. In option A, you have to invest RM4000 now and RM1000 three years from now. In option B. you have to invest RM2500 now, RM1500 a year from now, and RM1000 three years from now. In both options, you will receive four annual income of RM3000 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the present worth criterion, assuming 13% interest? Based on conventional payback period method, choose either (A/B/Both) PW Option A PW Option B Based on PW analysis method, choose Option (A or B) Submit :A : 9290.7 : 6602.9 :A Format Format Format Format
You plan to invest $12,000 per year into a retirement account. If you earn a compound annual rate of return of 11%, how many years will it take you to reach a balance of $1,500,000? Question 2 options: 22.83 25.79 24.24 21.09 26.76
Suppose that you plan to invest 400,000 baths annually for 25 years for a retirement . Your investment return rate is 4 % . a ) What is your total retirement fund ? b ) If you plan to retire with a lump sum of 25 million baths , what should be your alternative investment's return ? c ) If you cannot find any alternative investments and have to stick with the investment yields of 4 % , how much do you have to invest annually ?
1. You want to have an income of $50,000 per year in retirement, and you think you will be alive for 30 years in retirement. How much do you need to have invested the day you retire, in real dollars, assuming a 3% real rate of return?
Tom was trying to determine the best way to save for his retirement. He was selecting between two plans and reasoned that they would provide him the same yield at the end of the terms. Plan A: Deposit $250 per month at 8% annual interest, compounded monthly, for 20 years. Plan B: Deposit $500 per month at 8% annual interest, compounded monthly, for 10 years. Is Tom correct? If not, which plan would provide him the larger annuity? Select the correct answer below: Yes, Tom is correct. Since he is doubling his monthly payment, he can cut the investment time by half. The same amount is deposited either way. No. Plan A will provide a larger savings since there is more time for compound interest to take effect. No. Plan B will provide a larger savings since he is depositing more each month, there is a larger principal for interest to be compounded upon. There is not enough information to determine the answer.
suppose you are given an option to invest in two annuity schemes scheme A and scheme B which of the options would you choose? scheme A scheme B Neither Both
Suppose you are planning for retirement. At thebeginning of this year and each of the next 39 years,you plan to contribute some money to your retirementfund. Each year, you plan to increase your retirement contribution by $500. When you retire in 40years, you plan to withdraw $100,000 at the beginning of each year for the next 20 years. You assumethe following about the yields of your retirementinvestment portfolio:■ During the first 20 years, your investments willearn 10% per year.■ During all other years, your investments will earn5% per year.All contributions and withdrawals occur at thebeginnings of the respective years.a. Given these assumptions, what is the least amountof money you can contribute this year and stillhave enough to make your retirement withdrawals?b. How does your answer change if inflation is 2%per year and your goal is to withdraw $100,000 peryear (in today’s dollars) for 20 years?
Suppose Chris plans to make a $644 savings payment at the beginning of each month for 22 years with his first payment 10 years from today. Use this information and assume an interest rate of 5.91% per year to find the future value of his savings payments.
Assuming a tax rate of 30%, a nominal return of 9%, a savings period of 35 years, and an annual deposit of $10,000 into an RRSP, how much will a person have saved for retirement? What is your recommendation regarding when the contributions should be made to the RRSP? Justify your answer using the time value of money

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