14) Dixon Shuttleworth has been offered the choice of three retirement-planning investments. The first investment offers a 5 percent return for the first 5 years, a 10 percent return for the next 5 years, and a 20 percent return thereafter. The second investment offers 10 percent for the first 10 years and 15 percent thereafter. The third investment offers a constant 12 percent rate of return. Determine, for each of the given number of years, which of these investments is the best for Dixon if he plans to make one payment today into one of these funds and plans to retire in the following number of years. a. 15 years b. 20 years c. 30 years
Q: (a) Calculate the yield to maturity of this bond. (b) Calculate the price of this bond if the…
A: YTM is the annual yield that a bond holder would get it they held the bond until maturity. Price of…
Q: Greta has risk aversion of A 5 when applied to return on wealth over a one-year horizon. She is…
A: Capital allocation is the process of deciding how a company will invest its financial resources to…
Q: Suppose that a stock price is currently 61 dollars, and it is known that at the end of each of the…
A: A European Put option is a financial contract that grants the holder the right, but not the…
Q: Synovec Company is growing quickly. Dividends are expected to grow at a rate of 15 percent for the…
A: The current share price is calculated using the following equationWhere, D0 is the current dividend…
Q: d Martha are twins, and just graduated from college. They plan to retire in 40 years. To that end,…
A: In order to answer the question, we must see the amount per month invested and for the period of…
Q: A Treasury bill that settles on May 18, 2019, pays $100,000 on August 21, 2019. Assuming a discount…
A: Here,FaceValue of T Bill is $100,000Issue Date is May 18,2019Settlement Date is Aug 21,2019Discount…
Q: You borrow $400,000 for 30 years to purchase a house with an interest rate of 9 percent. How much is…
A: A mortgage monthly payment is the amount a borrower pays each month to repay a home loan. It…
Q: Steve borrowed $9,000 at a simple interest rate of 8 7/8% for 5 years. How much interest does he owe…
A: Principal Amount = p = $9000Interest Rate = r = 8 7/8 = 8.875%Time = t = 5 Years
Q: You decide to save $75,000 at each year-end for three years. If the interest rate is 8% compounded…
A: The FV of an investment refers to the combined worth of the cash flows of the investment assuming…
Q: meila's Society Clothing Manufacturer has collection centres aroune akes its disbursements from…
A: The company always tries to increase the cash money available so that the company can work smoothly…
Q: An insurance company is offering a new policy to its customers. Typically, the policy is bought by a…
A: Future value refers to the value of the current asset at some future date affected by interest and…
Q: A payday loan is structured to obscure the true interest rate you are paying. For example, you pay a…
A: Effective rate of interest is the equivalent interest rate which is determined by considering the…
Q: f you invest $2,700 for 20 years and it doubles in that time frame, what is the interest rate at…
A: The future value can be calculated by
Q: If you net $14.25 per hour and work 40 hours a week, 4 weeks per month, and have monthly expenses…
A: Hourly wage = $14.25Hours per week = 40Weeks per month = 4Rent = $825.50Car payment =…
Q: mith corp. is planning a Bond issue to finance a new project. Smith plans to issue 2000 bonds with a…
A: EPS stands for "Earnings Per Share." It is a financial metric that represents the portion of a…
Q: 6 You have narrowed down your choices for a new car to two opuons. One is relatively cheap with a…
A: Net Present Value is also known as NPV. It is a capital budgeting techniques which help in decision…
Q: What is the present value of $3,000 that is due in 4 years if the interest rate is 3.85% 3…
A: As per the concept of time value of money the worth of money changes with passage of time. This is…
Q: Your grandmother has been putting $600 into a savings account on every birthday since your first…
A: The future value of an annuity can be calculated using the formula,
Q: investor obtained a fully amortizing mortgage five years ago for $95,000 at 11 percent for 30 years.…
A: Loans are paid by fixed equal monthly payments that carry the payment for interest and payment for…
Q: White Oaks Properties builds strip shopping centers and small malls. The company plans to replace…
A: There may be differential costs at different points of time related to equipment. Equivalent annual…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: In the NPV analysis, we compute the present value of all future benefits. This present value is then…
Q: If an investor requires a real return of 3% and the average inflation rate is 4%, what is the lowest…
A: Given:Real return = 3% = 0.03Inflation rate = 4% = 0.04
Q: Use the table for the question(s) below. Consider the following expected returns, volatilities, and…
A: GivenStockExpected ReturnStandard DeviationCorrelation with Duke EnergyCorrelation with…
Q: How much interest is earned in 8 years on $8400 deposited in an account paying 7% interest,…
A: We need to use compound interest formula to calculate interest earned on deposit in 8…
Q: Required information [The following information applies to the questions displayed below. A pension…
A: Required:Portfolio Invested in Stock =?Portfolio invested in Bond Fund =?Expected Return of Optimal…
Q: at is the future value of $750.00 received today and deposited at 8% per year for 10 years with…
A: Future value of the amount is the amount being deposited and amount of interest accumulated over the…
Q: You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for…
A: To protect yourself from a potential drop in land value, you want to purchase a financial instrument…
Q: Kayla Thompson is married and currently rents an apartment for $650 per month and paying $375…
A: To determine whether Kayla should rent or buy the townhouse, we need to calculate the total cost of…
Q: You are planning to invest $5,000 in an account earning 5% per year for retirement. a. If you put…
A: The value at retirement is calculated using following equation as future valueFuture value = Where,…
Q: Jack places an amount of 560 in an account at the end of each year for 12 consecutive years…
A: Annual depoist (C) = $560Interest rate (r) = 0.08Number of deposits (n) = 12Value at the end of 12th…
Q: Weeks ago, the consumer products giant, Unilever, announced plans to buy back 700,000 shares using…
A: Given that Unilever wants to buy back 700,000 shares using a Dutch auction, we need to see where the…
Q: If you have $60,000 in a bank account that is paying an interest rate of 4 percent that is being…
A: To find out how many years it will take to double an investment with a constant interest rate, you…
Q: Derek currently has $12,962.00 in an account that pays 5.00%. He will withdraw $5,837.00 every other…
A: Cash Flow at year 0=$12,962.00Cash Flow at for year 1,3,5,7,9,11,13,15= $5,837.00 Cash Flow at year…
Q: what would be the year-end amount available in perpetuity from the endowment for charitable purpose?
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: e Clark family began savings for their child's college 15 years ago. Each year they contributed…
A: Future value of annuity formula.FV = A*whereFV = Future value of annuityA = periodic depositsr =…
Q: Consider a bond that pays 7% semiannually and has 12 years to maturity. The market requires an…
A: Compound = Semiannually = 2Coupon Rate = r = 7 / 2 = 3.5%Time = t = 12 * 2 = 24Interest Rate = r = 4…
Q: Welch Corporation is planning an investment with the following characteristics (ignore income…
A: Internal rate of return.IRR means internal rate of return.It is the rate of return at which Present…
Q: You need a particular piece of equipment for your production process. An equipment-leasing company…
A: Buying and leasing are two options for acquiring assets, such as cars or real estate. Buying…
Q: anessa deposited $1,300 at the end of every month into an RRSP for 7 years. The interest rate earned…
A: Future value of money includes the amount being deposited over the period of time and amount of…
Q: Calculate the present value of an annuity due given the following information: number of periods =…
A: The present value of an annuity due is the current value of a series of payments or cash flows…
Q: Department A's cost was $10,000 in year 1 of its operation; however, it is estimated that costs will…
A: Present value is the current value future value of money at specified rate of interest. If we will…
Q: Cute Camel Woodcraft Company just reported earnings after tax (also called net income) of $9,750,000…
A: The formula for P/E ratio is Therefore, a company's share can exhibit a negative P/E ratio when the…
Q: A Treasury bond with 9 years to maturity is currently quoted at 115:9. The bond has a coupon rate of…
A: To find the yield value of a 32nd for the Treasury bond, you can use the quoted price and coupon…
Q: Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: he net cash flow diagram of a tradesman's account based on his work is given above. a) According to…
A: Interest Rate: In some cases, like the one you mentioned, interest rates may be factored in to…
Q: A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of…
A: The expected return of the portfolio refers to the average profits that the portfolio provides to…
Q: n you handwrite this or type it instead of using excel
A: According to the expectation theory short term interest rate should be in line with long term…
Q: Suppose you observe the following situation: Beta 1.35 1.04 Security Pete Corp. Repete Co. Assume…
A: In the given case, we have provided the beta and the expected return of each security.So, using the…
Q: Bob has been investing $5,000 in stock at the end of every year for the past 12 years. If the…
A: The formula for calculating the future value of annuity is
Q: A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been…
A: Present Value (PV) is a financial concept used to determine the current worth of a sum of money to…
Step by step
Solved in 3 steps with 2 images
- Suppose you are planning for retirement. At thebeginning of this year and each of the next 39 years,you plan to contribute some money to your retirementfund. Each year, you plan to increase your retirement contribution by $500. When you retire in 40years, you plan to withdraw $100,000 at the beginning of each year for the next 20 years. You assumethe following about the yields of your retirementinvestment portfolio:■ During the first 20 years, your investments willearn 10% per year.■ During all other years, your investments will earn5% per year.All contributions and withdrawals occur at thebeginnings of the respective years.a. Given these assumptions, what is the least amountof money you can contribute this year and stillhave enough to make your retirement withdrawals?b. How does your answer change if inflation is 2%per year and your goal is to withdraw $100,000 peryear (in today’s dollars) for 20 years?19. You are able to choose between two retirement policies described below.Policy A: Starting 35 years from now, you will receive equal annual payments of $10,000 for 10 years.Policy B: Thirty-five years from now, you will receive one lump-sum payment of $100,000.Which will you choose? Assume the rate of interest is 6 percent.Jill Chewwishes to choose the best of four immediate retirement annuities available toher. In each case, in exchange for paying a single premium today, she willreceive equal annual end-of-year cash benefits for a specified number of years.She considers the annuities to be equally risky and is not concerned abouttheir differing lives. Her decision will be based solely on the rate of returnshe will earn on each annuity. The key terms of each of the four annuities areshown in the following table. Annuity PremiumPaid Today AnnualBenefit Life(years) A $30,000 $3,100 20 B 25,000 3,900 10 C 40,000 4,200 15 D 35,000 4,000 12 a. Calculate to the nearest 1 percent the rateof return on each of the four annuities Jill is considering.b. Given Jill’s stated decision criterion, whichannuity would you recommend?
- Claire Fitch is planning to begin an individual retirement program in which she will invest $2.200 at the end of each year. Fitch plans to retire after making 30 annual investments in the program earning a return of 10%. What is the value of the program on the date of the last payment (30 years from the present)? (PV of $1. EV of $1, PVA of $1. and EVA of 5) (Use appropriate factor(s) from the tables provided. Round your "FV of an Ordinary Annuity" to 4 decimal places and final answer to the nearest whole dollar)You are offered a $3,360,000 retirement package to be given in $120,000 payments at the end of each of the next 28 years. You are also given the option of accepting a $1,190,000 lump sum payment now. Interest rates are at 8.3% over the next 28 years. Which is a better option? A- the offered annual payments of $120,000 b- the lump sum of $1,190,000 c- they are the same d cannot be determinedFor planning purposes, an individual wants to be able to spend $90,000 per year, at the end of each year, for an anticipated 30 years in retirement. In order to fund this retirement account, he plan to make annual deposits for 20 years at the end of his each working year. What is the amount he need deposit each year to fund his desired retirement spending? Use 10% as an annual simple rate for all calculations.
- Assume that you contribute $330 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $530 per month for the next 25 years. Given an 8% interest rate. What is the value of your retirement plan after the 40 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) a)What is the value at end of first set of contributions ? b)What is the value at end of second set of contributions?You plan to retire in 40 years. To provide for your retirement, you initiate a savings program of $4,000 per year, yielding 7 percent. What will be the value of the retirement fund after 40 years? Round to the nearest cent. DO NOT INCLUDE COMMAS OR $Katrina is planning to make an additional investment at the end of each year for his retirement in 20 years. Katrina plans to invest $5,000 each year for the first 5 years, $8,000 each year for the next 5 years, and $ 12,000 each year for the remaining 10 years. If the rate of return of 11 percent can be earned in these investments, how much money will Katrina have at the end of 20 years? (Answer must have step by step explainations.)
- Each of the following situations is independent. Work out your own solution to each situation, and thencheck it against the solution provided.1. John plans to retire in 12 years. Upon retiring, he would like to take an extended vacation, which heexpects will cost at least $40,000. What lump-sum amount must he invest now to have $40,000 at theend of 12 years if the rate of return is:a. Eight percent?b. Twelve percent?Suppose Lily’s current salary is $72, 000 per year, and she is planning to retire 25 years from now. She anticipates that her annual salary will increase by $1, 800 each year. (That is, in the first year she will earn $72, 000 in the second year $73, 800 in the third year $75, 600 and so forth.) At the end of each of the next 25 years, she plans to deposit 10% of her salary from that year into a retirement fund that earns 6% interest compounded daily. How much money will be in her account at the time of her retirement? Please use factor table and not excelThe Martinez are planning for a retirement home. They estimate they will need $212,000 4 years from now to purchase this home. Assuming an interest rate of 12%, with four equal amounts being deposited at the beginning of the period. What amount must be deposited at the beginning of each period?