To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns 65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first one right away, and makes deposits at the beginning of each year for 25 years. How much does he need to deposit each year in order to save enough to buy his annuity?

To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns 65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first one right away, and makes deposits at the beginning of each year for 25 years. How much does he need to deposit each year in order to save enough to buy his annuity?

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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Harry Taylor plans to pay an ordinary annuity of $6,000 annually for ten years so he can take a year's sabbatical to study for a master's degree in business. The annual rate of interest is 2.9%. How much will Harry have at the end of three years? How much interest will he earn on the investment after three years? At the end of three years Harry will have $ (Round to the nearest cent as needed.) He will earn S interest on the investment after three years. (Round to the nearest cent as needed.)
Isabelle wants to save for retirement. She earns $5400 in income each month, and wishes to deposit 10% of her income into a savings acount each month. If the savings account has a nominal interest rate of 7%, compounded monthly, how much will be in the account if she retires in 35 years?
Nikolay wants to make annual contributions to his RRSP for the next 30 years. He will increase each annual payment by 1.5%, and the RRSP can earn 9.3% compounded annually. If he wants to accumulate $250,000, what is the amount of his first payment at the end of the year?
Which of the following is TRUE? O An American call option on a stock should never be exercised early O An American call option on a stock should be exercised early when dividends are expected O It can sometimes be optimal to exercise early an American call option on a stock even when no dividends are expected and there is no liquidity or portfolio rebalancing need. O An American call option on a stock should never be exercised early when no dividends are expected << Previous Next ▸
The Calvarusos have decided to invest in a college fund for their young son. They invested $40,000 in a deferred annuity that will pay their son at the beginning of every month for 4 years, while he goes to college. If the account earns 2.50% compounded monthly and the annuity payments are deferred for 15 years, what will be the size of the monthly payments?
The Ward family wants to save money to travel the world. They purchase an annuity with a quarterly payment of $181 that earns 4.7% interest, compounded quarterly. Payments will be made at the end of each quarter. Find the total value of the annuity in 11 years.
John recently set up a TDA to save for his retirement. He arranged to have $150 taken out of each of his monthly checks; it will earn 8% interest. He just had his 45 birthday, and his ordinary annuity comes to term when he is 65. Find the future value of the account.
Andrea, a self-employed individual, wishes to accumulate a retirement fund of $250,000. How much should she deposit each month into her retirement account, which pays interest at a rate of 4.5%/year compounded monthly, to reach her goal upon retirement 20 years from now? (Round your answer to the nearest cent.
Adele is planning for retirement. She would like to have $75,000 in her hand at the beginning of her first year of retirement at age 65 to live on for the year. She estimates that the amount will have to grow by 6% every year to keep up with inflation. What APR (nominal rate per year) should her retirement account earn if it is compounded continuously? She plans to deposit $21,000 on her 40th birthday and plans to keep increasing the deposits by 6% every year and till her 64th birthday. She estimates her life expectancy to be 85, meaning she would like to have the last retirement payment on her 85th birthday.
b. Jason, a bachelor at age 65, has decided to convert the cash value of his life insurance policy into a quarterly fixed-payment annuity that will last for 20 years. Suppose that the cash value of Jason's life insurance policy is $2,000,000. The rate of return is guaranteed at 13% compounded quarterly. The first quarterly annuity payment will start 3 months later in next quarter. Find the quarterly payment that Jason will receive in each quarter of the following 20-years. Show all your calculations
Adele is planning for retirement. She would like to have $75,000 in her hand at the beginning of her first year of retirement at age 65 to live on for the year. She estimates that the amount will have to grow by 6% every year to keep up with inflation. What APR (nominal rate per year) should her retirement account earn if it is compounded continuously? She plans to deposit $21,000 on her 40th birthday and plans to keep increasing the deposits by 6% every year and till her 64th birthday. She estimates her life expectancy to be 85, meaning she would like to have the last retirement payment on her 85th birthday.
Khalil has decided to start an ordinary annuity.he plans to deposit $500 into this account each month at 2.4 % annual interest compounded monthly. How much will he have in this account in 20 years?

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