Future Value of Single Investment and Annuity Jane Dough was a teller in a large northeastern bank. She was single and approaching age 30, and she considered herself an honest and upright citizen. After considering what she might do to build a retirement plan for the future, she decided to embezzle $1,500,000. Subsequently she gave herself up to the authorities but did not return the $1,500,000. She was tried, convicted, and sentenced to 20 years in prison. After completing her 20-year term, she returned the $1,500,000 that she had stolen. She then decided to take a world cruise. On the ship someone asked her how she had accumulated enough money to afford the trip. She replied, “Do you know how much interest $1,500,000 will earn in 20 years if invested at an annual rate of 16% compounded quarterly?” Required 1. Determine the answer to Jane Dough’s question. The table factor for fn=40, i=4% is 4.801021. 2. Evaluate Jane’s retirement decision, assuming that she could have earned $21,000 each year for each of the 20 years she was in prison. Assume that $11,000 is required each year to cover living expenses and that she could have invested the remaining $10,000 at the end of each year to earn interest at 16% compounded annually.
Future Value of Single Investment and Annuity
Jane Dough was a teller in a large northeastern bank. She was single and approaching age 30, and she considered herself an honest and upright citizen. After considering what she might do to build a retirement plan for the future, she decided to embezzle $1,500,000. Subsequently she gave herself up to the authorities but did not return the $1,500,000. She was tried, convicted, and sentenced to 20 years in prison. After completing her 20-year term, she returned the $1,500,000 that she had stolen. She then decided to take a world cruise. On the ship someone asked her how she had accumulated enough money to afford the trip. She replied, “Do you know how much interest $1,500,000 will earn in 20 years if invested at an annual rate of 16% compounded quarterly?”
Required
1. Determine the answer to Jane Dough’s question. The table factor for fn=40, i=4% is 4.801021.
2. Evaluate Jane’s retirement decision, assuming that she
could have earned $21,000 each year for each of the 20 years she was in prison. Assume that $11,000 is required each year to cover living expenses and that she could have invested the remaining $10,000 at the end of each year to earn interest at 16% compounded annually.
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