Starting at the end of the present year (i.e., end of year 1), Meredith plans to deposit her annual bonuses into a savings account that pays 3% interest compounded quarterly. Her initial bonus is $5,000. This amount is expected to increase by $400 each successive year. Determine how much she will have in her account immediately after the sixth deposit.
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- Which of the following investment options willmaximize your future wealth at the end of 18 years?Assume any funds that remain invested will earn anominal rate of 12% compounded monthly.(a) Deposit $8,000 now.(b) Deposit $120 at the end of each month for thefirst 12 years.(c) Deposit $105 at the end of each month for 18years.(d) Deposit a lump sum in the amount of $35,000 atthe end of year 12.Suppose that an oil well is expected to produce 1,200,000 barrels of oil during its firstyear in production. However, its subsequent production (yield) is expected to increaseby 9% over the previous year's production. The oil well has a proven reserve of10,500,000 barrels. (a)Suppose that the price of oil is expected to be $120 per barrel for the next six years.What would be the present worth of the anticipated revenue stream at an interest rateof 10% compounded annually over the next six years?(b)Suppose that the price of oil is expected to start at $120 per barrel during the firstyear, but to increase at the rate of 3% over the previous year's price. What would bethe present worth of the anticipated revenue stream at an interest rate of 10%compounded annually over the next six years?(c)Consider part (b) again. After three years' production, you decide to sell the oil well.What would be a fair price?Suppose Sally’s current salary is $62,000 per year, and she is planning to retire 25 years from now. She anticipates that her annual salary will increase by $1,800 each year. in the first year she will earn $62, 000 in the second year $63, 800 in the third year $65, 600 and so forth.) At the end of each of the next 25 years, she plans to deposit 10% of her salary from that year into a retirement fund that earns 6% interest compounded daily. How much money will be in her account at the time of her retirement?
- Suppose Ted deposits $10,000 in a savings plan earning 5% compounded annually and Tess deposits $10,000 ina savings plan earning 10% compounded annually. Both leave their money on deposit for 40 years. Because Tess’srate is twice as great as Ted’s rate, is it true that Tess will earn twice as much interest? Explain why or why not.Then show calculations to prove your point of view. What is the future value for each investment? N i PV PMT FV 5 104. Eleanor makes year-end deposits of 500,000 the first year, 550,000 the second year, 605,000 thethird year, and so on increasing the next year’s deposit by 10% of the deposit in the preceding yearuntil the end of the 10th year. Ronald makes equal year-end deposits of 720,00,000 each year for 10years. A.) Is the gradient of Eleanor’s payments increasing or decreasing?B.) If interest on both funds is 12% compounded annually, who will be able to save more atthe end of 10 years.1. What is the Single Payment Compound Amount factor for an interest rate of 2% over 10 years? 2. What is the Uniform Gradient Future Worth factor for an interest rate of 10% over 10 years? 3. What is the Uniform Series Present Worth factor for an interest rate of 5.5% over 20 years? 4. A bank pays 3% interest per year (compounded annually). a. To what amount will a $5,000 deposit grow if left in the bank for 10 years? b. Draw the Cash Flow Diagram for this problem.
- Suppose that on September 30, 2021, a person opened an investment account with an initial deposit of $20,000. The account guarantees to pay interest at a nominal annual rate of 6%, compounded monthly. The person plans to deposit $3,000 into the account at the end of each and every month starting on October 31, 2021 and ending on March 31, 2024 (a total of 30 additional deposits). (a) How much money will be in the account after the 30th additional deposit is made? (b) What is the total amount of interest that will be earned over the 30-month planning horizon? (c) What is the effective annual interest rate that will be earned? Express your answer to the nearest tenth of a percent, i.e., in the form xx.x%.Rework part (f), assuming that Annie holds the bond for 10 years and sells it when the required return is 7.0%. Compare your finding to that in part (f), and comment on the bond's maturity risk. PV= 1,000 N=10 I/Y= 7% Assume that Annie buys the bond at its current price of $983.80 and holds it until maturity. What will her current yield and yield to maturity (YTM) be, assuming annual interest? After evaluating all of the issues raised above, what recommendation would you give Annie with regard to her proposed investment in the Atilier Industries bonds?2.4 A man wishes to provide a fund for his retirement such that from his 60th to 70th birthdays hewill be able to withdraw equal sums of P18,000 each for his yearly expenses. He investsequal amounts from his 41st to 59th birthdays in a fund earning 10% compounded annually.How much should each of these amounts be?
- Cory Manciagli is planning to retire in 20 years. Money can be deposited at 6% compounded quarterly. What quarterly deposit must be made at the end of each quarter until Cory retires so that he can make a withdrawal of $40,000 semiannually over the first 10 years of his retirement? Assume that his first withdrawal occurs at the end of six months after his retirement. (Hint: Apply concept of economic equivalence at the end of 20 years).Consider a 25-year loan with an annual interest rate of 7 percent and monthly payments of $1,201.53. The discount points charged by the lender at origination are 3 percent and the cost of borrower title insurance and mortgage insurance are, respectively, 0.5 percent and 2.0 percent of the loan amount. Additional fees paid to other third parties (i.e., not the lender) will equal $4,000. What is the loan amount? What is the lender’s yield/IRR? What is the effective borrowing cost (EBC)? USE EXCELAs part of your retirement plan, you have decided to deposit $9,000 at the beginning of each year into an account paying 3% interest compounded annually. (Round your answers to the nearest cent.). (a) How much (in $) would the account be worth after 10 years? $ (b) How much (in $) would the account be worth after 20 years? $ (c) When you retire in 30 years, what will be the total worth (in $) of the account? $ (d) If you found a bank that paid 6% interest compounded annually rather than 3%, how much (in $) would you have in the account after 30 years? $ (e) Use the future value of an annuity due formula to calculate how much (in $) you would have in the account after 30 years if the bank in part (d) switched from annual compounding to monthly compounding and you deposited $750 at the beginning of each month instead of $9,000 at the beginning of each year. $