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Sonia Gomez, a 45-year-old widow, wishes to accumulate 4250,000 over the next 15 years to supplement the retirement programs that are being funded by the federal government and her employer. She expects to earn an average annual return of about 8% by investing in a low-risk portfolio containing about 20% short -term securities, 30% common

How much will $1.00 deposited in a savings account earning a compound annual interest rate of 6 percent be worth at the end of the following number of years? a. 3 b. 5 c. 10 If you require a 9 percent return on your investments, which would be preferred. Why? a. $5,000 today b. $15,000

Bob invested $2,000 in an investment fund on his 21st birthday. The fund pays 7% interest compounded semiannually. Bob is celebrating his 50th birthday today. Bob decides he wants to retire on his 60th birthday and he wants to withdraw $75,000 per year, the first withdrawal on his 60th birthday and the last withdrawal on

Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms Moran, by contract, will retire at the end of exactly 12 yrs. Upon retirement, she is entitled to receive an annual end of year payment of $42,000 for exactly 20 years. If she dies prior

Problems 5-9, 5-10, 5-11, 5-12, 5-14, 5-15 5-9. Present and future values for different periods Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually a. An initial $500 compounded for 1 year at 6% b. An initial $500 compounded for 2 years at 6% c. The present value of

1. Carrie Tune will receive $19,500 a year for the next 20 years as a result of the new song she has written. If a 10 percent rate is applied, should she be willing to sell out her future rights now for $160,000? 2. At a growth (interest) rate of 8 percent annually, how long

1. As stated in the chapter, annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come in the beginning of each period (termed an annuity due). To find the present value of an annuity due, subtract 1 from n

1. General Mills will receive $27,500 a year for the next 10 years as a payment for a weapon he invented. If a 12 percent rate is applied, should he be willing to sell out his future rights now for $160,000? 2. Determine the amount of money in a saving account at the end of

1. You will receive $4,000, three years from now. The discount rate is 10 percent. a. What is the value of your investment two years from now? Multiply $4,000 X .909 (one year’s discount rate at 10 percent). b. What is the value of your investment one year from now? Multiply your answer to part

You have been offered two annuities for the same price. Annuity 1 pays $50,000 per year at the end of the year for 10 years. Annuity 2 pays $40,000 per year at the end of the year for 20 years. If your cost of capital is 10%, which of these two annuities is a better

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