You have $100,000 in your savings account and plan to retire with $750,000 in the bank in 40 years. You are hoping to achieve areasonable rate of return on your investments and want to know the target rate you should be looking for. Select one: a. 4.12 b. 3.14 c. 5.16 d. 6.13

You have $100,000 in your savings account and plan to retire with $750,000 in the bank in 40 years. You are hoping to achieve areasonable rate of return on your investments and want to know the target rate you should be looking for. Select one: a. 4.12 b. 3.14 c. 5.16 d. 6.13

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

See similar textbooks

Related questions

Q: You want to retire in 25 years. You currently have $200,000 saved and you believe you need…

A: The concept of time value of money will have to be used here. As per the concept of time value of…

Q: Question 3 Suppose you have two inyestments with the same interest rate. One investment is a…

A: We will understand this with the help of an example:Suppose the Principal amount=10000Rate of…

Q: 1On the day you retire you have $500,000 saved. You expect to live another 30 years during which…

A: Time value of money refers to the concept that money available today is worth more than the same…

Q: You have an investment account that started with $4,000 10 years ago and which now has grown to…

A: A.) We are given Amount invested (Present value) =4000 No. of period(Nper)=10years Amount grown to…

Q: 9. Calculate the present value of an investment that promises to pay you $1000 after year 1, $3000…

A: Step 1 The total of future investment returns discounted at a specific level of rate of return…

Q: You would like to start saving for retirement. Assuming you are now 25 years old and want to retire…

A: Accumulated value at the end of any period of an investment is also called the future value of an…

Q: You want to have $2 million in real dollars in an account when you retire in 30 years. The nominal…

A: Future value = fv = $2 million Time = t = 30 years Nominal rate = 11% Inflation rate = 5.5%

Q: If you were saving up to buy a boat for $200,000 in ten years and feel confident that your invested…

A: Given, Amount required is $200,000 Rate is 10% Number of years is 10

Q: Your current account balance is $16,500. You invested $3,000 12 years ago. What rate of return did…

A: Present value (PV) is the current value of a future payment or a stream of future payments,…

Q: You are now 35 years old and will retire at the age of 65. While you currently have no savings, you…

A: Future value refers to the projected value of a sum of money at a specified future date, assuming a…

Q: You plan to invest $13223 into an investment that you hope will earn a return of 10.28%. You will…

A: Future Value = P * (1+r)^nWhere P = Principal / Present ValueR = Rate of returnN = Number of Period

Q: In planning for your retirement, you expect to save $500 in year 1, $1500 in year 2, and amounts…

A: As you have asked multiple questions, we will solve the first question as per the policy presented…

Q: You want to have $2million when you retire. You think you can earn 11% return on your retirement…

A: The question is based on the concept of present value calculation for future cash flow. Formula as,…

Q: FUTURE VALUE OF AN ANNUITY Your client is 40 years old; and she wants to begin saving for…

A: The annuity is a series of cash flows wherein an equal amount is poad every period.

Q: Suppose a 65-year-old is contemplating retirement, expects to live for another 20 years, has a GHȼ1…

A: According to the rule, Because you have posted multiple questions,we will answer the first question…

Q: how much do you need to save today?

A: Given : Rate of return (r) = 8% Savings required at the end of the next 3 years are RM1,500,…

Q: Question 6 An investment scheme promises to increase the amount invested by 10 times over a period…

A: An investor represents a person or entity that invests a sum of amount for a corporation with the…

Q: 8) Special Retirement PlanYou set up a retirement plan where you will invest $20,000 per year in an…

A: Annuity is the payment series which are made at equal time intervals.

Q: You are targeting a retirement portfolio value of $2,500,000 in 20 years. You plan to make annual…

A: Using excel PMT function

Q: 4. a. b. C. d. 5. a. b. C. You plan on retiring in forty years and are contemplating retirement. you…

A: The FV of an investment refers to the cumulative value of its cash flows at a future date assuming…

Q: QUESTION 2 1. You need $30,000 to buy a new Air-Con for your house in 4 years. What value you must…

A: Solution:- When an amount is invested somewhere, it earns interest on it. The amount initially…

Q: Your current account balance is $7,500. You invested $6,300 5 years ago. What rate of return did…

A: Answer) Future value = P×(1+r)^n r is interest rate P is amount n is years Given: Future value =…

Q: You plan to retire after working for 45 years. You estimate you need 1 million to retire and live…

A: Future value refers to the anticipated value of an investment or asset at a specific point in the…

Q: You would like to know how much you need to save and invest monthly to have $1 million in your…

A: Future value is a financial term that refers to the value of an investment or asset at a specific…

Q: You are planning for an early retirement, so you decide to invest $5,000 per year, starting at age…

A: As per the time value of money, a dollar is worth more today than the same dollar in the future.…

Q: You would like to start saving for retirement. Assuming you are now 25 years old and you want to…

A: Accumulated investment refers to the value of a present asset at some future date affected by…

Q: Use Excel to solve the following problem. Assume that you are 39 years old planning for your future…

A: Let's say we save an amount M every month. Interest rate = 6% per annumHere, a period is a monthR =…

Q: You are trying to decide how much to save for retirement. Assume you plan to save $4,500 per year…

A: a. Use the Excel FV function with the following inputs to determine the value of investment on the…

Q: What rate of return would you need if you wanted to accumulate $1,000,000 in 25 years and invest…

A: Rate of return: It implies to the rate that is often expected or charged by the investor from the…

Q: O Exponential and Logarithmic Functions Finding the present value of an investment earning compound…

A: Borrowed amount refers to the loan borrowed by the borrower from the lender at a specified rate of…

Q: You are trying to decide how much to save for retirement. Assume you plan to save $6,000 per year…

A: The objective of the question is to calculate the retirement savings based on different scenarios.…

Q: wu would like to start saving for retirement. Assuming you are now 20 years old and want to retire…

A: The future value function or concept can be used to determine the future value of a present sum or…

Q: You want to save for retirement. Assuming you are now 25 years old and you want to retire at age 55,…

A: Here,TimePeriod of Investment is 30 yearsValue of Investment is $2,000Interest Rate is 11%

Q: uppose you had the following propositions of returns from two companies W and Y: Company…

A: Both investments proposed different amounts but the timing of the returns is different. Hence, the…

Q: The grade 10 learners at Stellenzicht Secondary School raised R5 800 at the cake sale. They want to…

A: Given, Amount raised is R5800 Bank A: 5.5% simple interest for 3 years Bank B: 4.5% compound…

Q: How much would you have to deposit into your investment account today to reach the goal in 8 years?

A: Time value of money(TVM) means that the amount of money received will be worth more than…

Q: Finance Approximately how much would you need to invest today, to receive $280 in ten years, if you…

A: Future Value is $280 Time period is 10 years Interest rate is 10% To Find: Present Value

Q: You are planning for an early retirement, so you decide to invest $5,000 per year, starting at age…

A: Retirement planning is the process of planning the retirement income goals. Retirement planning…

Q: Suppose that you set a goal of accumulating $2 million by the time you retire, and that you know you…

A: Accumulated amount needed = $2 milllion r = 6% Let A = Annual saving

Q: Suppose you had a relative deposit $10 at 5.5% interest 200 years ago. How much would the investment…

A: Future value is referred to as the value of the current asset on the basis of an assumed growth rate…

Question

You have $100,000 in your savings account and plan to retire with $750,000 in the bank in 40
years. You are hoping to achieve areasonable rate of return on your investments and want to know
the target rate you should be looking for.
Select one:
a. 4.12
b. 3.14
c. 5.16
d. 6.13

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Information given in the question

VIEW

Step 2: Computation of target rate

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10.0% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 20 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 20th withdrawal (assume your savings will continue to earn 10.0% in retirement)? d. If, instead, you decide to withdraw $300,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it…
You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year? A. $2,620.68B. $2,693.71C. $2,713.04D. $2,501.42
STRATEGY 2: SAVINGS LATER PLAN Assume that you are 22 years old but decide to wait before saving for retirement. You decide to start saving later when you are 42 years old. As a result, you start saving on January 1, 2042. You plan to retire on December 31, 2064, when you are 64 years old. There are 23 years from the time you started investing (saving) until you retire. When you start investing in 2042, you have no previous or other retirement savings. Assume there are 365 days in each year from 2022 to 2064. (Ignore leap years). Assume that taxes will not affect any of the amounts or your savings. You invest $350 at the end of each month into a retirement account paying 8.75% compounded monthly for 15 years starting on January 1, 2042. After 15 years, you do not make any more payments or withdrawals and leave the money in the retirement account until retirement. Show all work and answer the following questions: Assuming no withdrawals or additional payments were made, how much…
You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? a. 5.19% b. 5.46% Ⓒc. 6.05% d. 5.75% e. 4.93%
of return will you earn over the last 10 years? 17. Calculating Present Values Suppose you are still committed to owning a $175,000 Ferrari (see Question 9). If you believe your mutual fund can achieve an annual return of 11.2 percent, and you want to buy the car in 10 years on the day you turn 30, how much must you invest today? LO 2
How much do you need to invest today if you will also invest $2,700 at the end of every year for 39 years, in order to have $1,000,000 at the end of 39 years? Assume your investments earn a rate of return of 6.5% compounded annually. O $23,166 O $76,744 O $10,257 $49,207 O $47,800
K You have just received a windfall from an investment you made in a friend's business. She will be paying you $41,444 at the end of this year, $82,888 at the end of next year, and $124,332 at the end of the year after that (three years from today). The interest rate is 3.8% per year a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?
Assume an investor wishes to have £80,000 ten years from now as a retirement fund. How much money would have to be invested today at 6 percent compound interest? Group of answer choices £4,800 £8,000 £44,673 £54,0000
QUESTION 1 i. You just put $1,000 in a bank account that pays 6 percent nominal annual interest, compounded monthly. How much will you have in your account after 3 years? ii. You are currently investing your money in a bank account that has a nominal annual rate of 7 percent, compounded monthly. How many years will it take for you to double your money? iii. A real estate investment has the following expected cash flows: Cash Flows $10,000 Year 1 25,000 3 50,000 35,000 The discount rate is 8 percent. What is the investment's present value?
You have of $1,000,000 to invest. There are two different investment options for you. First option: (1.21*i)% pays simple interest. Second option: pays i% compounding interest rate. What is the value of i that makes the both options pay the same money at the end of second year. Select one: a. 1.21 b. 42 c. 21 d. 5.5 e. 10
kai
Give typing answer with explanation and conclusion

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS