Answered: Thomas deposited 300,000Php now, so…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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Comprehensive The following are three independent situations: 1. K. Herrmann has decided to set up a scholarship fund for students. She is willing to deposit 5,000 in a trust fund at the end of each year for 10 years. She wants the trust fund to then pay annual scholarships at the end of each year for 30 years. 2. Charles Jordy is planning to save for his retirement. He has decided that he can save 3,000 at the end of each year for the next 10 years, 5,000 at the end of each year for Years 11 through 20, and 10,000 at the end of each year for Years 21 through 30. 3. Patricia Karpas has 200,000 in savings on the day she retires. She intends to spend 2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend 6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period. Required: 1. In Situation 1, how much will the annual scholarships be if the fund can earn 6%? How much at 10%? 2. In Situation 2, (a) How much will Charles have at the end of 30 years if his savings can earn 10%? How much at 6%? (b) If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%? How much at 6%? (c) How much would Charles need to invest today to have the same amount available at the time he retires as calculated in Situation 2(a) at 10%? How much at 6%? 3. In Situation 3, how much will Patricias annuity be?
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264

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Thomas deposited 300,000Php now, so that his 3 year old daughter will receive 6 equal amounts of money yearly, starting on her 18th birthday. If money earns 20% compounded annually. How much the girl received yearly? Answer: A = P1,158,244.98