You are offered the opportunity to put some money away for retirement. You will receive 10 annual payments of $5,000 each beginning in 26 years. If you desire an annual interest rate of 12% compounded monthly, answer the following two questions: How much would you be willing to invest today? How much would the money (that you will be willing to invest today) be worth at the end of your last payment (i.e., in year 35)?
You are offered the opportunity to put some money away for retirement. You will receive 10 annual payments of $5,000 each beginning in 26 years. If you desire an annual interest rate of 12% compounded monthly, answer the following two questions: How much would you be willing to invest today? How much would the money (that you will be willing to invest today) be worth at the end of your last payment (i.e., in year 35)?
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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Hi There! I solved the problem below, but can you answer the question and put everything on an excel spreadsheet and show the formulas please for the questions below.
You are offered the opportunity to put some money away for retirement. You will receive 10 annual payments of $5,000 each beginning in 26 years. If you desire an annual interest rate of 12% compounded monthly, answer the following two questions:
- How much would you be willing to invest today?
- How much would the money (that you will be willing to invest today) be worth at the end of your last payment (i.e., in year 35)?
- Amount that you would be willing to invest today =
PV = $5,000/(1.01)26*12 + $5,000/(1.101)27*12 + $5,000/(1.01)28*12 + $5,000/(1.01)29*12 + $5,000/(1.01)30*12 + $5,000/(1.01)31*12 + $5,000/(1.01)32*12 + $5,000/(1.01)33*12 + $5,000/(1.01)34*12 + $5,000/(1.01)35*12
= $1,388.638
- Amount that would the money worth at the end of your last payment =
FV = $1388.64 * (1+ 0.01)35*12
= $90691.52
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