518 Words3 Pages

,Sarah L. G January 6, 2013
Written Assignment #1 1. A) $1,000 with 5% interest after 10 years gives you $1,628. Therefore, you would gain $628 in interest.
B) If the interest is withdrawn each year, a total of $500 would be earned because the $1,000 investment would earn $50 of simple interest each year.
C) The answers are different because if the interest is left untouched, it makes the principal amount higher each year, giving more money after 10 years. Compounded interest allows for more money that simple interest would.
2. A) If the individual retires at the age of 65, having started the program at age 40, there would be $219,318 in the account. $3,000 x (8% in 25 years)
3000 x 73.106 = $219,318
B) If*…show more content…*

$102,320 = x *(1-1.09^-20)/.09 x = $ 11,208 5. If a parent wants to save 100,000 in 18 years in an account that earns 9%, he would have to invest $2,421.24 annually. FV= PV of Annuity Due x (1.09)18; $100,000 = PV of Annuity Due x (1.09)18; PV of Annuity = 100.000/(1.09)18; PV of Annuity = $21,199.37 PV of Annuity = Payment x [1.(1.09)-18] /0.09; $21,199.37 = Payment x 8.7556; Payment = $21,199.37/8.7556; Payment = $2,421.24 6. If a widow has $93,000 investment yielding 9% annually, she can NOT withdraw $16,000 a year for the next 10 years. PV = Payment x [1-(1.09)-10]/0.09; Pmnt = $93,000/[1-(1.09)-10]/0.09; Pmnt = $14,491.26 7. No I will not buy it because the current price is higher than the present value of the investment. PV of Annuity= 10,000 x [1-(1.10)-25]/0.10; PV of Annuity = $90,770.40 12. FV = PV x (1+r)5; $100,000 = $65,000 x (1=r)5; 1.53846 = (1+r)5; (1.53846) 1/5 = 1+r; 1.08998 = 1+r; annual rate = 8.998$ 13. PV of Annjuity = Payment x [1-(1+r)-5]/r; $33,520 = $10,000 x [1-(1+r)-5]/r Period 9nper0 = 5; Payment = $10,000; Present Value (PV) = $33,250; Future Value (FV) = $0; Rate of Return =

$102,320 = x *(1-1.09^-20)/.09 x = $ 11,208 5. If a parent wants to save 100,000 in 18 years in an account that earns 9%, he would have to invest $2,421.24 annually. FV= PV of Annuity Due x (1.09)18; $100,000 = PV of Annuity Due x (1.09)18; PV of Annuity = 100.000/(1.09)18; PV of Annuity = $21,199.37 PV of Annuity = Payment x [1.(1.09)-18] /0.09; $21,199.37 = Payment x 8.7556; Payment = $21,199.37/8.7556; Payment = $2,421.24 6. If a widow has $93,000 investment yielding 9% annually, she can NOT withdraw $16,000 a year for the next 10 years. PV = Payment x [1-(1.09)-10]/0.09; Pmnt = $93,000/[1-(1.09)-10]/0.09; Pmnt = $14,491.26 7. No I will not buy it because the current price is higher than the present value of the investment. PV of Annuity= 10,000 x [1-(1.10)-25]/0.10; PV of Annuity = $90,770.40 12. FV = PV x (1+r)5; $100,000 = $65,000 x (1=r)5; 1.53846 = (1+r)5; (1.53846) 1/5 = 1+r; 1.08998 = 1+r; annual rate = 8.998$ 13. PV of Annjuity = Payment x [1-(1+r)-5]/r; $33,520 = $10,000 x [1-(1+r)-5]/r Period 9nper0 = 5; Payment = $10,000; Present Value (PV) = $33,250; Future Value (FV) = $0; Rate of Return =

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