You just turned 20 years old and want to retire when you turn 65. You plan to put $4,900 every year into a ROTH IRA, a retirement account from which you can withdraw money after retirement without having to pay any taxes. You expect to earn a return of 7% on your investments every year. a. How much money can you expect to have at age 65 if you make your first annual deposit now and your last one on the day you turn 64? b. How much money can you expect to have at age 65 if you make your first deposit 10 years from now (at age 30) and your last one on the day you turn 64?

You just turned 20 years old and want to retire when you turn 65. You plan to put $4,900 every year into a ROTH IRA, a retirement account from which you can withdraw money after retirement without having to pay any taxes. You expect to earn a return of 7% on your investments every year. a. How much money can you expect to have at age 65 if you make your first annual deposit now and your last one on the day you turn 64? b. How much money can you expect to have at age 65 if you make your first deposit 10 years from now (at age 30) and your last one on the day you turn 64?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 34P

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Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
You just turned 24 years old and want to retire when you turn 65. You plan to put $4,500 every year into a ROTH IRA, a retirement account from which you can withdraw money after retirement without having to pay any taxes. You expect to earn a return of 5% on your investments every year.a. How much money can you expect to have at age 65 if you make your first deposit now and your last one on the day you turn 64? b.
You just turned 24 years old and want to retire when you turn 65. You plan to put $4,500 every year into a ROTH IRA, a retirement account from which you can withdraw money after retirement without having to pay any taxes. You expect to earn a return of 5% on your investments every year.a. How much money can you expect to have at age 65 if you make your first deposit now and your last one on the day you turn 64? b. How much money can you expect to have at age 65 if you make your first deposit 10 years from now (at age 34) and your last one on the day you turn 64?
2. (From section 6.2) You want to be able to withdraw $50,100 from your account each year for 20 years after you retire. You expect to retire in 35 years. If your investment account earns 5.5% interest, how much will you need to deposit into the account at the end of each year until you reach retirement to achieve your retirement goals? (a) The first part is finding how much we need to have in the account by the time we retire. Which formula will you use first? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = r = A or Po = (c) Write the formula you will use with the numbers plugged in below. (d) Solve using your calculator or technology and round to two decimal places. Work is not required here. Write the answer here and state which variable you solved for. (e) Using your own words, describe what you found by solving the equation in terms of the word problem given.
K You are saving for retirement. To live comfortably, you decide you will need to save $3 million by the time you are 65. Today is your 20th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 7%, how much must you set aside each year to make sure that you will have $3 million in the account on your 65th birthday? www The amount to deposit each year is $. (Round to the nearest dollar.)
Q10. You are saving for retirement. To live comfortably, you decide you will need to save $1 million by the time you are 65. Today is your 28th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 8%, how much must you set aside each year to make sure that you will have $1 million in the account on your 65th birthday? Question content area bottom Part 1 The amount to deposit each year is $ enter your response here. (Round to the nearest dollar.)
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13. You have just made your first $4,000 contribution to your retirement account. Assuming you earn an 11 percent rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing? (Does this suggest an investment strategy?). 14. You are saving up for a down payment on a house. You will deposit $600 a month for the next 24 months in a money market fund. How much will you have for your down payment in 24 months if the fund earns 12% APR compounded monthly?
You want to have a million dollars in the bank when you retire. You think you can save $5 000 this year, and increase that by 2% every subsequent year, in a bank that offers you 5% interest. If you make your first deposit in a year's time, how many years will it be from now before you can retire? 41 42 43 ✓44 45
1. If you want to have $500,000 when you retire and you put $85,000 in your retirement account right now, and you can get an interest rate of 5.2% a year, how many years will it take you to achieve your goal? 2. Sammy decides to set up a retirement fund. He deposits $7,000 a year. He earns an annual interest rate of 4.5. How much will Sammy have in his retirement fund in 25 years? 3. Sammy wants to see what his retirement fund would be if he made $7,000 deposits at the first of every year instead of at the end. How much will Sammy have im his retirement fund in 25 years at the rate of 4.5% if the deposits are made at the beginning of the year? 4. Sammy wants to help a fellow small business owner. The other owner, Mr. Noles offers to pay Sammy $4,250 a year for 8 years in exchange for a loan of $28,000. If the interest rate is 4.2%, is this a good investment for Sammy? What is the present value of this annuity?
4. Looking forward - Future value Compounding Interest You know that paying yourself by depositing money in a savings account is a prudent start to your retirement plan. You determined that, based on your other obligations, you can save 6,875.00 per year via an annual, single year-end deposit. You are 40 years old now, so your money will grow for the next 25 years until you turn 65. You will open a savings account at the US Bank branch near your home. Its savings accounts are paying 6% interest. The following table shows the future value factors for various periods and interest rates: Future Value of an Annuity Factor Year 2% 3% 5% 6% 8% 9% 10% 10 10.950 11.460 12.578 13.180 14.487 15.190 15.937 12 13.412 14.190 15.917 16.870 18.977 20.140 21.384 15 17.293 18.600 21.578 23.270 27.152 29.360 31.772 20 24.297 26.870 33.066 36.780 45.762 51.160 57.274 25 32.030 36.460 47.726 54.860 73.105 84.700 98.346 30 40.567 47.570 66.438 79.060 113.282 136.300…