Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337671002
Author: Brigham
Publisher: Cengage
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Question
Chapter 5, Problem 30P
a.
Summary Introduction
To calculate: Number of years taken by Person A and Person L to become millionaires if both earn the same return.
Financial Goal:
Financial goal is a money based target which a person wants to achieve by the certain age. It requires making plan for reducing debt, creating enough wealth to have at the time of retirement and reducing the amount of tax.
b.
Summary Introduction
To calculate: Person A’s contribution to become millionaire at the same age of Person L.
Financial Goal:
Financial goal is a money based target which a person wants to achieve by the certain age. It requires making plan for reducing debt, creating enough wealth to have at the time of retirement and reducing the amount of tax.
c.
Summary Introduction
To explain: Whether it is rational or irrational for Person A to invest in the bond fund rather than in stocks.
Financial Goal:
Financial goal is a money based target which a person wants to achieve by the certain age. It requires making plan for reducing debt, creating enough wealth to have at the time of retirement and reducing the amount of tax.
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Sarah and Mae, who are twins, just received P30,000 each for their 25th birthday. They both have aspirations to become millionaires. Each plan to make a P5,000 annual contribution to her “early retirement fund” on her birthday, beginning a year from today. Sarah opened an account with the First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 6% per year in the past. Mae invested in the New Issue Bio-Tech Fund, which invests in small, newly issued biotech stocks and whose investors have earned an average of 20% per year in the fund’s relatively short history.
Post your Excel file here to answer the questions below:
a. Draw a timeline of the cash flows.
b. If the two women’s funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire?
c. How large would Sarah’s annual contributions have to be for her to become a millionaire at the same age as Mae, assuming their expected returns are realized?
Allison and Leslie, who are twins, just received
$15,000 each for their 29th birthday. They
both have aspirations to become millionaires.
Each
plans to make a $5,000 annual contribution
to her "early retivement fund" on her birthday,
begiming a year from today. Allison opened an
account with the Jafety First Bund Fund, a mutual
fund that invests in high-quality bonds whose
investors have earned 8% per year in the past.
Leslie invested in the New Issue Bio- Tech Fund,
which invests in small, newly issued bio tech stucks
and whose investors have earned an average of 17%
per year in the find's relatively short history.
u) If the two women's funds eam the same returns
in the future as in the past, how old will each be
when she becomes a millionaire? Round your answers
to two decimal places.
years
Allison
Leslie.
years
b) How large would Allison's annual contributions have
to be for her to become a millionaire at the
same age as Leslie, assuming their expected returns
are realized? Round…
Erika and Kitty, who are twins, have just received $30,000 each for their 25th
Each sister plans to make a $5,000 annual contribution to her retirement fund on her birthday, beginning a year from today.
Erika opened an account with a fund that provides a 6% return per year.
Kitty invested in fund that provides a 20% return per year.
How old will each sister be when she becomes a millionaire?
How large should Erika’s annual contributions have to be for her to become a millionaire at the same age as Kitty?
Chapter 5 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 5 - Prob. 1QCh. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - The present value of a perpetuity is equal to the...Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - What is a loan amortization schedule, and what are...Ch. 5 - FUTURE VALUE If you deposit 2,000 in a bank...Ch. 5 - Prob. 2P
Ch. 5 - FINDING THE REQUIRED INTEREST RATE Your parents...Ch. 5 - TIME FOR A LUMP SUM TO DOUBLE If you deposit money...Ch. 5 - TIME TO REACH A FINANCIAL GOAL You have 33,556.25...Ch. 5 - FUTURE VALUE: ANNUITY VERSUS ANNUITY DUE Whats the...Ch. 5 - PRESENT AND FUTURE VALUES OF A CASH FLOW STREAM An...Ch. 5 - LOAN AMORTIZATION AND EAR You want to buy a car,...Ch. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - GROWTH RATES Sawyear Corporations 2017 sales were...Ch. 5 - EFFECTIVE RATE OF INTEREST Find the interest rates...Ch. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - PRESENT VALUE OF AN ANNUITY Find the present...Ch. 5 - Prob. 16PCh. 5 - EFFECTIVE INTEREST RATE You borrow 230,000; the...Ch. 5 - Prob. 18PCh. 5 - FUTURE VALUE OF AN ANNUITY Your client is 26 years...Ch. 5 - Prob. 20PCh. 5 - EVALUATING LUMP SUMS AND ANNUITIES Kristina just...Ch. 5 - Prob. 22PCh. 5 - FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find...Ch. 5 - Prob. 24PCh. 5 - FUTURE VALUE OF AN ANNUITY Kind the future values...Ch. 5 - PV AND LOAN ELIGIBILITY You have saved 4,000 for a...Ch. 5 - EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A...Ch. 5 - Prob. 28PCh. 5 - BUILDING CREDIT COST INTO PRICES Your firm sells...Ch. 5 - Prob. 30PCh. 5 - REQUIRED LUMP SUM PAYMENT Starting next year, you...Ch. 5 - REACHING A FINANCIAL GOAL Six years from today you...Ch. 5 - FV OF UNEVEN CASH FLOW You want to buy a house...Ch. 5 - AMORTIZATION SCHEDULE a. Set up an amortization...Ch. 5 - Prob. 35PCh. 5 - NONANNUAL COMPOUNDING a. You plan to make five...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - REQUIRED ANNUITY PAYMENTS A father is now planning...Ch. 5 - Prob. 41SPCh. 5 - Prob. 42IC
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