Solutions To Assignment TVM Practice Q

It is much easier to calculate the FV of annuity when the payments are made at semiannual compounding, the periodic rate is simply the nominal rate divided by two (number of compounding periods per year). Thus, the result should be:

Given that the total profit over 8 years is $1.2375B (or $155M per year for 8 years), we will now compute the Present Value of this amount using the following formula:

A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years, how much money will be in the savings account? (Bluman, A. G. 2005, page 230).

How much will they need at retirement if they can earn a 4% rate of return? d. The Hamptons want to have $3,500,000 for their retirement in 30 years. How much should they save annually if they think they can earn 7% on their investments?

33) Each year for eight years, an investment will generate incremental sales of $8,000 and cash operating expenses of $2,500. The applicable tax rate is 30% and depreciation is $2,000. What is the net cash flows for each of the eight years?

b. If you inherited $100,000 today and invested all of it in a security that paid an 8% rate of return, how much would you have in 15 years?

Debbie wants to have $38,855 in her bank account 5 years from now. The account will pay 0.7% interest per month. How much money does she need to put in her bank account at the end of each month to achieve this goal?

12. Today, you deposit $10,750 in a bank account that pays 3 percent simple interest. How much interest will you earn over the next 7 years?

In question four, Janet was asked to solve a question that deals with annuity payments, specifically, ordinary annuities. It starts by asking of how much you will make if you add $2,000 every year and it is compounded by 10% interest every year. These, for the most part, are future value problems. The first one comes out to be a future value of $12,210.20, which does not satisfy the need for $20,000. The next part asks what the value would be if the interest was compounded semiannually. You have to do an equation in order to find out what the effective annual interest rate. Through this equation you come out with a value of 10.25% and after the calculator calculations you come out with a future value of $12,271.11, also not meeting the demand for that first year of college. The next part asks what payment will you need in order to get to that $20,000 number and the present value comes to be $3,275.95. Next, the case asks what original payment you would need in order

13. What is the formula for the Present Value (PV) for a finite stream of cash flows (1 per year) that lasts for 10 years?

1. If Mrs. Beach wanted to invest a lump sum of money today to have $100,000 when she retired at 65 (she is 40 years old today) how much of a deposit would she have to make if the interest rate on the C.D. was 5%?

The future value equation is written as: Future Value= Present Value (1+ interest rate) ^years. The year value is written as an exponent. In this case, Granny wants to invest her $25,000 for 18 years at the 1.72 rate five year CD rate. For the purposes of this exercise, the grandchild will start school in eighteen years, but the assumption will be that the 1.72 rate is constant over that period.

(Compound annuity) what is the accumulated sum of each of the following streams of payme

1. Assume that at retirement you have accumulated $825,000 in a variable annuity contract. The assumed investment return is 5.5% and your life expectancy is 18 years. What is the hypothetical constant benefit payment?

First we need to get the present value of the annuity for the 1,500 semiannual PMTs at year 14