Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 36SP
Summary Introduction
To determine: The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Springfield mogul Montgomery Burns, age
75, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to withdraw $
0.9 billion at the beginning of each year for
7 years from a special offshore account that will pay
26 percent annually. In order to fund his retirement, Mr. Burns will make
25 equal end-of-the-year deposits in this same special account that will pay
26 percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to fund this retirement account?
Question content area bottom
Part 1
a. If the retirement account will pay
26 percent annually, how much money will Mr. Burns need when he retires?
$
enter your response here
billion (Round to three decimal places.)
Springfield mogul Montgomery Burns, age
90,
wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to withdraw
$1.1
billion at the beginning of each year for
7
years from a special offshore account that will pay
18
percent annually. In order to fund his retirement, Mr. Burns will make
10
equal end-of-the-year deposits in this same special account that will pay
18
percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to fund this retirement account?
(Future value of a complex annuity) Springfield mogul Montgomery Burns, age 75, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to
withdraw $1.1 billion at the beginning of each year for 6 years from a special offshore account that will pay 19 percent annually. In order to fund his retirement, Mr. Burns will make 25
equal end-of-the-year deposits in this same special account that will pay 19 percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to
fund this retirement account?
a. If the retirement account will pay 19 percent annually, how much money will Mr. Burns need when he retires?
$ billion (Round to three decimal places.)
b. How large of an annual deposit must he make to fund this retirement account?
$ million (Round to two decimal places.)
@
2
30€
W
S
X
ommand
JUN
26
#
3
80
F3
E
D
C
$
4
DOD
000
F4
R
F
%
5
V
A
FS
T
G
♫
^
6
tv A
MacBook Air
B
F6
Y
H
&
7
44
F7
U
N…
Chapter 5 Solutions
Foundations Of Finance
Ch. 5 - Prob. 1RQCh. 5 - The processes of discounting and compounding are...Ch. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 1SPCh. 5 - Prob. 2SPCh. 5 - Prob. 3SPCh. 5 - Prob. 4SPCh. 5 - Prob. 5SP
Ch. 5 - (Compound value) Stanford Simmons, who recently...Ch. 5 - (Future value) Sarah Wiggum would like to make a...Ch. 5 - Prob. 8SPCh. 5 - (Future value) Giancarlo Stanton hit 59 home runs...Ch. 5 - Prob. 10SPCh. 5 - Prob. 11SPCh. 5 - Prob. 12SPCh. 5 - Prob. 13SPCh. 5 - Prob. 14SPCh. 5 - Prob. 15SPCh. 5 - Prob. 16SPCh. 5 - Prob. 17SPCh. 5 - Prob. 18SPCh. 5 - Prob. 19SPCh. 5 - Prob. 20SPCh. 5 - Prob. 21SPCh. 5 - Prob. 22SPCh. 5 - Prob. 23SPCh. 5 - Prob. 24SPCh. 5 - (Solving for PMT of an annuity) To pay for your...Ch. 5 - Prob. 26SPCh. 5 - Prob. 27SPCh. 5 - (Loan amortization) On December 31, Beth Klemkosky...Ch. 5 - (Solving for r of an annuity) You lend a friend...Ch. 5 - Prob. 30SPCh. 5 - (Compound annuity) You plan on buying some...Ch. 5 - (Loan amortization) On December 31, Son-Nan Chen...Ch. 5 - (Loan amortization) To buy a new house you must...Ch. 5 - Prob. 34SPCh. 5 - Prob. 35SPCh. 5 - Prob. 36SPCh. 5 - Prob. 37SPCh. 5 - Prob. 38SPCh. 5 - (Compound interest uith nonannnal periods) a....Ch. 5 - (Compound interest with nonannual periods) After...Ch. 5 - Prob. 41SPCh. 5 - (Spreadsheet problem) To buy a new house you take...Ch. 5 - (Nonannual compounding using a calculator) Jesse...Ch. 5 - (Nonannual compounding using a calculator)...Ch. 5 - (Nonannual compounding using a calculator) Fords...Ch. 5 - Prob. 46SPCh. 5 - (Nonannual compounding using a calculator) Dennis...Ch. 5 - Prob. 48SPCh. 5 - (Calculating the effective annual rate) Youve just...Ch. 5 - Prob. 50SPCh. 5 - Prob. 51SPCh. 5 - (Present value) The Kumar Corporation is planning...Ch. 5 - (Perpetuities) What is the present value of the...Ch. 5 - (Complex present value) How much do you have to...Ch. 5 - (Complex present value) You would like to have...Ch. 5 - Prob. 56SPCh. 5 - Prob. 57SPCh. 5 - Prob. 58SPCh. 5 - Prob. 59SPCh. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Present value of a complex stream) Don Draper has...Ch. 5 - (Complex stream of cash flows) Roger Sterling has...Ch. 5 - (Future and present value using a calculator) In...Ch. 5 - Prob. 1MCCh. 5 - Prob. 2MCCh. 5 - Prob. 3MCCh. 5 - Prob. 4MCCh. 5 - Prob. 5MCCh. 5 - Prob. 6MCCh. 5 - Prob. 7MCCh. 5 - Prob. 8MCCh. 5 - Prob. 9MCCh. 5 - Prob. 10MCCh. 5 - Prob. 11MC
Knowledge Booster
Similar questions
- (Future value of a complex annuity) Springfield mogul Montgomery Burns, age 90, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to withdraw $0.9 billion at the beginning of each year for 9 years from a special offshore account that will pay 22 percent annually. In order to fund his retirement, Mr. Burns will make 10 equal end-of-the-year deposits in this same special account that will pay 22 percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to fund this retirement account?arrow_forwardLinus would like to start saving for his retirement. Starting April 1, 1950, he will make annual deposits into an account, with the last deposit coming on April 1, 1990. Linus assumes he will get pay raises, and plans to increase his deposits by 3.1 percent each year. If he would like to be able to withdraw 44000 dollars per year forever, with the first withdrawal on April 1, 1993, how much will Linus's first deposit need to be? (Assume an interest rate of 4.1 percent effective throughout.)arrow_forwardWhen John Michael retired, he had a retirement account with a $910,000 balance. He decided that he would use this account to provide 30 years of equal monthly payments. It is now 19 years later and John Michael just received his 228th montly check. Looking ahead, he can see that he needs to stretch his payments over another 16 years rather than the eleven more he had originally planned. If he does this, how large will his new montly payments be? Assume he earns interest at the APR of 9% compounded monthly throughout his retirement.arrow_forward
- Elijah James is in his early 30s and is thinking about opening an IRA. He can't decide whether to open a traditional/deductible IRA or a Roth IRA, so he turns to you for help. To support your explanation, you decide to run some comparative numbers on the two types of accounts; for starters, use a 30-year period to show Elijah what contributions of $5,000 per year will amount to (after 30 years) if he can earn, say, 10 percent on his money. Round your answers to the nearest dollar. 1A. traditional IRA $___1B. Roth IRA $ _____ Will the type of account he opens have any impact on this amount?-Select: YES OR NO Assuming that Elijah is in the 30 percent tax bracket (and will remain there for the next 30 years), determine the annual and total (over 30 years) tax savings he'll enjoy from the $5,000-a-year contributions to his IRA. Contrast the (annual and total) tax savings he'd generate from a traditional IRA with those from a Roth IRA. If an answer is zero, enter "0". Round your answers…arrow_forwardElijah James is in his early 30s and is thinking about opening an IRA. He can't decide whether to open a traditional/deductible IRA or a Roth IRA, so he turns to you for help. To support your explanation, you decide to run some comparative numbers on the two types of accounts; for starters, use a 35-year period to show Elijah what contributions of $5,000 per year will amount to (after 35 years) if he can earn, say, 8 percent on his money. Round your answers to the nearest dollar. 1A. traditional IRA $______1B. Roth IRA $_______ Will the type of account he opens have any impact on this amount? Select: Yes or No 2. Assuming that Elijah is in the 25 percent tax bracket (and will remain there for the next 35 years), determine the annual and total (over 35 years) tax savings he'll enjoy from the $5,000-a-year contributions to his IRA. Contrast the (annual and total) tax savings he'd generate from a traditional IRA with those from a Roth IRA. If an answer is zero, enter "0". Round your…arrow_forwardJim wants to deposit an amount anually to meet his retirement needs. Assume that he will deposit a fixed annual amount for the next 20 years into a retirement savings account, starting one year from now. Mark has a son who will be attending college and plans to make 5 withdrawals (starting one year after making his final deposit into the retirement account) of $35,000 each to pay for his annual tuition for the following 5 years. Commercial Banks will be paying 6 percent on such retirement accounts for the next 25 years. How much should Mark place in the account annually to cover his retirement needs.arrow_forward
- An engineer will deposit 15% of her salary each year into a retirement fund. If her current annual salary is $80000 and she expects that it will increase by 5% (g) each year, what will be the present worth of the fund after 35 years if it earns 5% interest? (Answer: $400,000) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardDick Eckel recently set up a TDA to save for his retirement. He arranged to have $135 taken out of each of his biweekly checks; it will earn Interest. He just had his twenty-ninth birthday, and his ordinary annuity comes to term when he is 65. Find the following. (Round your answers to the nearest cent.) (a) The future value of the account (b) Dick's total contribution to the account (c) The total interest %24 Need Help? Read Watcharrow_forwardZachary Snyder is 28 years old and hopes to be able to retire 30 years from now, at age 58, with a nest egg of $1,000,000. He decides to start depositing money into an investment account that will pay 8% compounded semimonthly. Zachary arranges with his employer to have automatic withdrawals from each semimonthly paycheck, with the money going into his investment account. Calculate the amount of each automatic withdrawal, assuming the withdrawals are made at the end of each semimonthly period. A. $332.92 B. $670.98 C. $334.03 D. $1,440.82arrow_forward
- Mr. A made a 20-year retirement plan and according to his plan, he aimed to withdraw 6000 TL at the end of the first year and planned to increase the amount withdrawn by 800 TL at the end of the following year. Since he has agreed with a bank that pays 9% compounded annual interest to implement this plan, how much money should Mr. A have to deposit in the bank at the start of the plan?arrow_forward2.Selyn Cohen is 63 years old and recently retired. He wishes to provide retirement income for himself and is considering an annuity contract with the Philo Life Insurance Company. Such a contract pays him an equal-dollar amount each year that he lives. For this cash-flow stream, he must put up a specific amount of money at the beginning. According to actuary tables, his life expectancy is 15 years, and that is the duration on which the insurance company bases its calculations regardless of how long he actually lives. (A) If Philo Life uses a compound annual interest rate of 6 percent in its calculations, what must Cohen pay at the outset for an annuity to provide him with $10,000 per year? (Assume that the expected annual payments are at the end of each of the15 years.)arrow_forwardDick Eckel recently set up a TDA to save for his retirement. He arranged to have $120 taken out of each of his biweekly checks; it will earn 9-% interest. He just had his twenty-ninth birthday, and his ordinary annuity comes to term when he is 65. Find the following. (Round your answers to the nearest cent.) (a) The future value of the account $ x (b) Dick's total contribution to the account $ 112320 (c) The total interest $ xarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning