You have been hired to run a pension fund forTelDet Inc, a small manufacturing firm. Thefirm currently has $5 million in the fund andexpects to have cash inflows of $2 million ayear for the first 5 years (.04 growth rate)followed by cash outflows of $ 3 million a yearfor the next 5 years (.02 growth rate). Assumethat interest rates are at 8%. a. How muchmoney will be left in the fund at the end ofthe tenth year? b. If you were required to paya perpetuity after the tenth year (starting inyear 11) out of the balance left in the pensionfund, how much could you afford to pay?include growth rates

Calculate the value in 10 years as follows: a. value in 10 years = Future value of 5 year cash…

Answered: You have been hired to run a pension…

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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Find the required value for each problem. Show the formula used and the counts for each problem. 6. How much more would you earn in three years if you invest $ 10,000 at a compound annual interest rate of 5.75%, instead of at a simple interest rate of 5.75%? 7. What would be the compound annual interest rate you would need to double your investment of $ 1,000 in three years? 8. If your bank pays you 5% annual interest, compounded monthly, how much would you have in ten years if you invest $ 1,000 today? 9. How much would you have to deposit today in a bank account that pays 9.25% annual interest, compounded quarterly, if you expect to have $20,000 at the end of five years? 10. Suppose you invested $ 2,500 in the business that a friend opened and in three years this friend returned $ 3,700 to you. How much was the return on your investment in your friend's business?
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $2.1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds.Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Market Value Five year: Twenty year: b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face Value Five year: Twenty year:
You would like to start saving for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 9% per year over the past 80 years and is expected to continue at this rate. You decide to invest $1,000 at the end of each year for the next 30 years. Required: Calculate how much your accumulated investment is expected to be in 30 years. (FV of $1. PV of $1. EVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Accumulated investment amount 100,834.00
You would like to start saving for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 13% per year over the past 80 years and is expected to continue at this rate. You decide to invest $2,000 at the end of each year for the next 30 years.Required:Calculate how much your accumulated investment is expected to be in 30 years.
Suppose you invest $5,000 into a mutual fund that is expected to earn a rate of return of 7%. The amount of money you will have in 10 years is closest to which of the following? The amount you will have in 25Lyears is closest to which of the following? O 1) $53,500; $802,500 O 2) $2,552.56; $3,257.79 O 3) $9,835.76; $27,137.16 O 4) $3,138; $ 1,311,892 5) None of the answers are correct
you that will pay you $100,000 when you turn 25. If the relevant discount rate is 11 percent, how much is this fund worth today? (See Problem 3.) Calculating Rates of Return You've been offered an investment that will double your money in 12 years. What rate of return are you being offered? Check your answer using the Rule of 72. (See Problem 4.) 4.3 Calculatin
You are 19 years old today. You want to have $381,507.06 in an investment account when you are 60 years old. You will start with an initial deposit in one year from now and grow it by 3% per year for a total of 15 investments. How much is the amount of that initial deposit? Assume an interest rate (a.k.a. return on your investment of 6%. Use the $ sign and a comma and round to the nearest thousand...(e.g. $8,000 would be the form of a correct answer). Hint....the correct answer should be very close to a multiple of $1,000.
You plan to invest $9.9 into an investment that you hope will earn a return of 12.01%. You will withdraw your money in 5 years. How much will you withdraw? 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?

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