Gertrude wants to make $500 monthly withdrawals for 10 years from an account which pays 4% compounded monthly. How much does Gerti need in her account now so that she can make her first withdrawal in one month?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Gertrude wants to make $500 monthly withdrawals for 10 years from an account which pays 4% compounded monthly. How much does Gerti need in her account now so that she can make her first withdrawal in one month?
A concept that implies the future worth of the money is lower than its current value due to several factors such as inflation, and many more is term as the TVM (time value of money).
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