1.You have $2,500 to invest today at 9% interest compounded on an annual basis. a. Find how much you will have accumulated in the account at the end of (1) 3 years, (2) 6 years, and (3) 9 years. (Hint: Calculate the FVs) b. Use your findings in part a to calculate the amount of interest received in (1) the first 3 years (years 1 to 3), (2) the second 3 years (years 4 to 6), and (3) the third 3 years (years 7 to 9).
1.You have $2,500 to invest today at 9% interest compounded on an annual basis.
a. Find how much you will have accumulated in the account at the end of
(1) 3 years, (2) 6 years, and (3) 9 years. (Hint: Calculate the FVs)
b. Use your findings in part a to calculate the amount of interest received in (1) the
first 3 years (years 1 to 3), (2) the second 3 years (years 4 to 6), and (3) the third
3 years (years 7 to 9).
2.Abul plans to retire in exactly 20 years. His goal is to
create a fund that will allow him to receive BDT 300,000 at the end of each year for the
40 years between retirement and death (his wife told him that he would die exactly 40
years after retirement). Abul knows that he will be able to earn 8% per year during
the 40-year retirement period.
a. How large a fund will Abul need when he retires in 20 years to provide the
40-year, BDT 300,000 retirement
b. How much will he need today as a single amount to provide the fund calculated in part a if he
earns only 6% per year during the 20 years preceding retirement?
3.During the year just ended, Spriha’s distribution had pretax earnings from operations of
$2,290,000. In addition, during the year it received $50,000 in income from interest on bonds &
received $88,000 in income from dividend on common stock holding in Microsoft. Spriha’s
distribution company is in the 40% tax bracket & is eligible for 80% dividend exclusion.
*Interest income received by the company is treated as ordinary income.
a. Find the tax and after-tax amount attributable to the interest income.
b. Find the tax and after-tax amount attributable to the dividend income.
4.“Having zero debt in the firm’s capital structure is not an ideal scenario.” Do you agree with
this statement? Explain
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