A 35-year old man is considering a lavish personal pension plan paying 50,000 monthly annuities for 5 years that should start when he reaches 55. He makes quarterly deposits now on the account bearing a constant interest rate of 2.5% per annum for 5- years and plans to place the total balance accrued on time deposit. All interests are at 2.5% per annum except for the time deposit that bears 8.0% annual interest. 1. What is the present value of his pension plan? 2. What is the present value of the 5-year quarterly deposits? 3. How much is the 5-year quarterly deposits?
A 35-year old man is considering a lavish personal pension plan paying 50,000 monthly annuities for 5 years that should start when he reaches 55. He makes quarterly deposits now on the account bearing a constant interest rate of 2.5% per annum for 5- years and plans to place the total balance accrued on time deposit. All interests are at 2.5% per annum except for the time deposit that bears 8.0% annual interest. 1. What is the present value of his pension plan? 2. What is the present value of the 5-year quarterly deposits? 3. How much is the 5-year quarterly deposits?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 10P
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A 35-year old man is considering a lavish personal pension plan paying 50,000
monthly
deposits now on the account bearing a constant interest rate of 2.5% per annum for 5-
years and plans to place the total balance accrued on time deposit. All interests are at 2.5%
per annum except for the time deposit that bears 8.0% annual interest.
1. What is the present value of his pension plan?
2. What is the present value of the 5-year quarterly deposits?
3. How much is the 5-year quarterly deposits?
4. Construct a cash flow diagram for the repayment scheme
5. Construct the amortization table for the deposits.
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