Fundamentals of Financial Manageme...
Solutions
Fundamentals of Financial Manageme...
FUTURE VALUE OF AN ANNUITY Your client is 26 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $8,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 10% in the future.
- a. If she follows your advice, how much money will she have at 65?
- b. How much will she have at 70?
- c. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age?
a.
To compute: Future value of ordinary annuity at the age of 65.
Annuity Due:
Annuity due is the annuity which has repeating payment and which takes place at the beginning of each period. Under annuity due, the time interval of payment and the amount remains the same. An ordinary annuity has lesser present value than the annuity due, as the payment made in ordinary annuity is at the end of the period while in annuity due is at the beginning of the period.
Formula to calculate future value of annuity,
Where,
- FV is the future value.
- C is the monthly payment.
- I is the interest rate.
- N is the number of years.
Substitute $8,000 for C, 10% for I and 39
b.
To compute: Future value of ordinary annuity at the age of 70.
Annuity Due:
Annuity due is the annuity which has repeating payment and which takes place at the beginning of each period. Under annuity due, the time interval of payment and the amount remains the same. An ordinary annuity has lesser present value than the annuity due, as the payment made in ordinary annuity is at the end of the period while in annuity due is at the beginning of the period.
c.
To compute: Monthly payment for 20 years and 15 years.
Annuity Due:
Annuity due is the annuity which has repeating payment and which takes place at the beginning of each period. Under annuity due, the time interval of payment and the amount remains the same. An ordinary annuity has lesser present value than the annuity due, as the payment made in ordinary annuity is at the end of the period while in annuity due is at the beginning of the period.
Chapter 5 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addWhat is a firms intrinsic value? Its current stock price? Is the stocks true long-run value more closely relate...
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
A bonds expected return is sometimes estimated by its YTM and sometimes by its YTC. Under what conditions would...
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
According to traditional Keynesian analysis, which has a larger impact on GDPa dollar of tax cuts or a dollar o...
Principles of Macroeconomics (MindTap Course List)
Draw an example of a production possibilities frontier for Robinson Crusoe, a shipwrecked sailor who spends his...
Principles of Microeconomics (MindTap Course List)
Effect of omitting adjustments For the year ending April 30, Urology Medical Services Co. mistakenly omitted ad...
Financial & Managerial Accounting
Describe Enterprise Risk Management (ERM).
Accounting Information Systems
Name one economic interaction that isnt covered by the simplified circular-flow diagram.
Principles of Economics (MindTap Course List)
Figure 1.7 provides a bar chart showing the annual revenue for Google from 2004 to 2014. (The Wall Street Journ...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
(Law of Diminishing Marginal Utility) Some restaurants offer āall you can eatā meals. How is this practice rela...
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from t...
Cornerstones of Financial Accounting
You are working on a lengthy forma or informal repon for either this chapter or Chapter 10. you may want top yo...
Essentials of Business Communication (MindTap Course List)
What is a multilateral development bank (MDB)? Who supports these banks?
Foundations of Business (MindTap Course List)
What is inflation and what causes it?
Brief Principles of Macroeconomics (MindTap Course List)
A sonnet is a 14-line poem in which certain rhyming patterns are followed. The writer Raymond Queneau published...
Probability and Statistics for Engineering and the Sciences
Asset turnover ratio Financial statement data for years ended December 31, 20Y3 and 20Y2, for Edison Company fo...
Corporate Financial Accounting
Many fast-food restaurant chains, such as MC McDonalds (MCD), will occasionally discontinue restaurants in thei...
Financial And Managerial Accounting
Data related to the acquisition of timber rights and intangible assets during the current year ended December 3...
Financial Accounting
Why do economists make assumptions?
Essentials of Economics (MindTap Course List)
Provided below is a trial balance for Bills Delivery Service. Use this trial balance for Exercises 3-10B, 3-1 I...
College Accounting, Chapters 1-27
If you are the CEO of a global company, how might you determine whether a globalization, multidomestic, or glob...
Management, Loose-Leaf Version
How do IFRS differ from U.S. GAAP in regard to determining if an asset is impaired? What are the implications o...
Intermediate Accounting: Reporting And Analysis
Ellie Harrod, owner of Harrods Dry Cleaners, makes bank deposits in the night depository at the close of each b...
College Accounting (Book Only): A Career Approach
(Appendix Question) In a hashing structure a. pointers are used to indicate location of a record with the same ...
Accounting Information Systems
Explain cause-related marketing
MKTG 12:STUDENT ED.-TEXT
Contrast how marketing plans differ at various levels in an organization.
Contemporary Marketing
Use the following information for Exercises 3-37 and 3-38: Alisha Incorporated manufactures medical stents for ...
Managerial Accounting: The Cornerstone of Business Decision-Making
Using process costs for decision making The costs of materials consumed in producing good units in the Forming ...
Financial & Managerial Accounting
Ocular Realty Co. pays weekly salaries of 16,600 on Friday for a five-day workweek ending on that day. Journali...
Financial Accounting
VALUATION OF A CONSTANT GROWTH STOCK Investors require a 15% rate of return on Levine Companys stock that is, r...
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Suppose interest rates on residential mortgages of equal risk are 5.5% in California and 7.0% in New York. Coul...
Fundamentals of Financial Management (MindTap Course List)
What is the payroll process? What functions and activities does the process perform?
Pkg Acc Infor Systems MS VISIO CD
Answer the following questions. a. does an upward shift in the Philips curve correspond to an upward shift in t...
Exploring Economics
What is the effect on the fundamental accounting equation if supplies are purchased on account? How will the fu...
College Accounting (Book Only): A Career Approach
Record the following transactions in a general journal: May 4Merchandise listed at 2,900, less a trade discount...
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Statement of cash flows A summary of cash flows for Ousel Travel Service for the year ended November 30, 2016, ...
Accounting (Text Only)
A seven-year medical research study reported that women whose mothers took the drug DES during pregnancy were t...
Statistics for Business & Economics, Revised (MindTap Course List)
This chapter explains that investment can be increased both by reducing taxes on private saving and by reducing...
Principles of Macroeconomics (MindTap Course List)
Entries for receipt and dishonor of note receivable Journalize the following transactions of Trapper Jons Produ...
Corporate Financial Accounting
Based on Westerberg, Bjorklund, and Hultman (1977). Newcors steel mill has received an order for 25 tons of ste...
Practical Management Science
Application 6 explains that even though no one directly and explicitly pays for good weather (Here is 100 for t...
Microeconomics
Lean manufacturing uses value streams to produce a family of products that require the same manufacturing seque...
Cornerstones of Cost Management (Cornerstones Series)
Do you feel learning is different in professional services firms versus manufacturing organizations? Explain wh...
Purchasing and Supply Chain Management
What does perfectly inelastic supply signify?
Economics (MindTap Course List)
Besides the name and address of the payer, what other information should be listed in the address box of the pa...
PAYROLL ACCT.,2019 ED.(LL)-TEXT
What is the most important responsibility of the Fed?
Macroeconomics
Analysis of income and cash flows The following data (in millions) were taken from http://tinance.yahoo.com. Ex...
Survey of Accounting (Accounting I)
