Solutions To Assignment TVM Practice Q

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?

d. If you can earn 9% per year, how much will you have to save each year if you want to retire in 40 years with $3 million?

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. I = 4%, PV = $74,000, N = 20, FV = $162,143.11 a. Using Excel enter '=-FV(4%,20,,74000) = $162,143.11 salary needed to keep pace with inflation. b. FV = $2 million, N = 25, I = 8%, PMT = $27,357.26 a. Using Excel, enter '=-PMT(8%,25,0,2000000)' = $27,357.26 as the necessary annual payment to be saved. c. PMT = $160,000, N = 20, I = 4%, PV = $2,174,452.22 a. Using Excel, enter '=-PV(4%,20,160000)' = $2,174,452.22 needed for retirement. d. FV = $3.5 million, N = 30, I = 7%, PMT = $37,052.41 a. Using Excel, enter '=-PMT(7%,30,0,3500000)' = $37,052.41 annual payment to be saved.

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%?

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?

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).

$25,000 if invested for 18 years at a 1.72% interest rate. The stated rate of

11. A 65-year-old wishes to convert the cash value of his insurance policy into an annuity. He can select an annuity that will last 15 years or one that lasts 20 years. If the cash value is $450,000 and interest rates are 5.25%, how much less per year will he receive if he chooses the 20-year annuity?

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?

| What is the present value of your firm’s cash flows for years 1 through 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

After the calculations you end up coming out with a rate of 14.87%. The third and final part of question three asks what rate you will need if the interest is compounded semiannually. All you have to do is double the amount of terms and you will come out with a lower number of 7.177%. Since the interest is compounded semiannually that means that you will need to times that number by two and you come out with your final number of 14.35%.

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

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

Compound interest If the annual interest rate is r and there are n interest payments per year, the rate of interest per payment period is equal to j = r /n, and the number of interest payments within a period of t years is equal to tn. Denoting by A(t) the amount at the end of t years with n interest payments per year, formula (1) changes into A(t) = P (1 + j)nt