39. Problem 5.39 (Required Annuity Payments) Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 46. He currently has $235,000 seved, and he expects to earn 9% annually on his savings. How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round intermediate calculations. Round your answer to the nearest dollar
Q: We sometimes need to find out how long it will take a sum of money (or anything else to grow to some…
A: Future is the value of money which is today available based on the time and interest rate and more…
Q: Bassett Fruit Farm expects its EBIT to be $381,000 a year forever. Currently, the firm has no debt.…
A: To calculate the unlevered value of the firm, we need to find the total value of the firm without…
Q: The market value of Charter Cruise Company's equity is $15 million and the market value of its debt…
A: Equity = $15 millionDebt = $5 millionCost of equity (ke)= 20%Cost of debt (kd)= 8%Required:Company's…
Q: You’ve collected the following information from your favorite financial website. 52-Week Price Stock…
A: The value of the firm using the dividend growth model is calculated by ascertaining the dividend…
Q: Suppose you plan to have $90,000 in 15 years from now and you can invest your savings at 2%…
A: Compounding is based on the concept of time value of money. A sum of money invested today grows into…
Q: Century Aluminium owns assets that have a 70% probability of having a market value of $850M and a…
A: In finance, concepts such as probability, present value, cost of debt, cost of equity, and default…
Q: What is the Sharpe Ratio for a stock priced at $80 that is expected to receive $2 in dividends and…
A: Sharpe ratio shows the risk adjusted performance of a stock and it shows how much risk is involved…
Q: Investment Corporation is considering a portfolio with 70% weighting in a cyclical stock and 30%…
A: We are given two stocks- cyclical and countercyclical with weights of each- 70% and 30%…
Q: 5000. She can borrow from a finance company at 6.90% add-on interest for 4 years. Or she can borrow…
A: In the add on method of interest all interest for the period of the loan is added at one time and…
Q: The project should be undertaken only under the "mitigation" assumption. The project should be…
A: The Net Present Value(NPV) method is used to determine the present value of future cash inflows…
Q: You are evaluating various investment opportunities currently available and you have the fol- lowing…
A: Sharpe ratio refers to the measure of the performance of a portfolio based on its return after it…
Q: nnuity payments are assumed to come at the end of each payment period (termed an ordinary annuity).…
A: The annuity refers to the series of cash flows that last for a limited period of time. The future…
Q: An auto repair shop borrowed $15,000 to be repaid by semi-annual payments over 8 years. Interest on…
A: Interest rate (i): 12% per year, compounded semi-annually, so it's 6% per period.Number of periods…
Q: Bank of vancouver pays 7% simple interest on its saving account balances, whereas bank of calgary…
A: Time value of money is one of useful concept being used in finance. It says that amount invested…
Q: Joshua can purchase a new car for $35,000. Alternatively, in addition to a down payment of $1,400,…
A: Buying involves purchasing the asset outright, paying the full purchase price, and becoming the…
Q: You want to receive $700 at the end of each month for 5years. Interest is 8.1% compounded monthly…
A: Calculating the present value is especially helpful when planning for retirement. To determine the…
Q: the Macaulay duration in years of a 3% coupon bond with 2 years to maturity and a face value of…
A: In this question , 3% coupon bond with 2 years to maturity and a face value of $100 , Bond's yield…
Q: Using the following binomial model of one-year interest rate, price a 2-year, 6% annual-coupon bond…
A: To value a 2-year bond using a binomial interest rate tree, we start with the cash flow at the…
Q: (Solving for i) In March 1963, Ironman was introduced in issue 39 of the comic book Tales of…
A: The nominal rate is the rate that is agreed upon by the borrower and lender, but it does not reflect…
Q: estor sold a bond issued by PQR Corporation with nominal yield of 2% and maturity of June 30, 2027…
A: An investor sold a bond issued by PQR Corporation with Nominal Yield of 2% on June 30, 2020 and…
Q: The assets of ABC Limited consists of fixed and current while its current liabilities comprise bank…
A: Just write 3-4 sentences in paragraph form once. A balance sheet is a summary of the financial…
Q: There is a choice to buy a car worth $28,000 with 100% financing at 4.99% APR for 60 month or lease…
A: When a firm purchases an asset, it is required to take care of maintenance expenses as well as other…
Q: Pascal has recently opened an RRSP. He plans to deposit $ 965 at the end of every month for 20…
A: Here,Monthly Deposit $ 965.00Time Period in Years20Nominal Rate5.90%Compounding Period (Semi…
Q: (Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R. Morin…
A: Banks while providing loans keep aside a minimum deposit balance in loan account in order to reduce…
Q: 2. Present value. Agatha owns a savings account which compounds interest annually at a rate of 4%…
A: Present value is the equivalent value today based on the time and interest rate that would give…
Q: Consider an American Put option with time to expiry of 5 months and a strike price of 82. The…
A: The binomial model is a mathematical model used in finance to value options. It assumes that the…
Q: Problem 7. Assume that you are a US investor who has available $100,000,000 to invest for six…
A: With periodic interest rate in US (rUS), periodic interest rate in Italy (rI) and spot exchange…
Q: In year 1, a fund increases from $179mm to $186mm (gross asset value). The fund has a 3/15 structure…
A: The structure 3/15 indicates that the management fee is 3% of the entire funds or assets under…
Q: An account was opened on January 1, 1999 with a deposit of $12,000. Additional deposits of $100…
A: In compounding there is interest on interest including interest on interest on the principal amount…
Q: Alpha Industries is considering a project with an initial cost of $8 million. The project will…
A: Net present value (NPV) is a financial method used to evaluate the profitability of an investment or…
Q: How much should you invest each month in order to have $400,000 if your rate of return is 6.1%…
A: The periodic Amount that needs to be invested is calculated using the formula future value of the…
Q: 3 eBook References Wendell's Donut Shoppe is investigating the purchase of a new $40,000…
A: According to bartleby guidelines , if question involves multiple sub parts,, if question involves…
Q: New ventures ultimately try to combine their core competencies and strategic assets to create a Core…
A: New VentureThe foundation and growth of a company or initiative with a novel vision and goal is…
Q: Use a two period binomial tree to price a 8 month American style call on on TFS struck at $8. The…
A: Financial derivatives known as call options and put options provide the holder the right, but not…
Q: Quary Company is considering an investment in machinery with the following information. The…
A: Net present value is based on the time value of money and can be calculated as the difference…
Q: Problem 11 Intro A stock just paid an annual dividend of $7.7. The dividend is expected to grow by…
A: ParticularsValuesAnnual dividend$7.70Required rate of return8%Growth rate3%Expected P/E…
Q: Suppose a 10-year, $1,000 bond with a(n) 10% coupon rate and semiannual coupons is trading for a…
A: Yield to maturity represents the bond's total rate of return that is earned by the bondholder if the…
Q: Over the next three years, the expected path of 1-year interest rates is 1, 2,and 1 percent, and the…
A: Expected Path of the interest rate is 1, 2, 1 percent. Premia is 0, 0.2 and 0.5 for 1-year, 2-years…
Q: have been asked to calculate the required return for a stock that you are considering investing in.…
A: Required rate is the rate expected from the security based on the risk involved in the security that…
Q: 1 2 Laurman, Inc. is considering the following project: 3 4 Required investment in equipment 5…
A: Internal rate of return refers to that discount rate.
Q: you are analyzing Citi as a potential stock investment. You're expecting them to pay a dividend of…
A: Current Price of Stock is that maximum amount which can paid by the investor for purchasing the…
Q: A real estate agent works on a 13% commission. What is her commission on a house that she sold for…
A: Commission is one of the useful source of revenue. Commission is generally paid on sale of goods and…
Q: Konstantin wants to buy a 2 month European style put option on $1 on USD. The spot USD/CAD exchange…
A: The binomial model is a mathematical model used in finance to value options. It assumes that the…
Q: How much will Valerie's insurer pay under Part A-Liability Coverage? O $160,000 O $180,000 O…
A: The liability coverage limits are mentioned as 75/150/25 , which means:Bodily injury liability per…
Q: Tracey paid $130 for an item that was originally priced at $550. What percent of the original price…
A: Paid Price = $130Original Price = $550
Q: he cash flow that is available for distribution to a corporation's creditors and stockholders is…
A: In a company’s cash flow statement different type of cash flows are shown – cash flow from operating…
Q: Two mutually exclusive alternatives A and B are being considered: Year A 1 A 2 0 1 2 3 5 -$2500 $746…
A: Internal rate of return-IRR is the rate at which the operation of the particular project generates…
Q: 1 2 INCOME STATEMENT 3 Net sales 4 5 Gross profit 6 General Admin and selling expenses Cost of goods…
A: Here,Year20182019Net Sales $327,500$390,000
Q: A firm goes public. The firm receives $38 for each of the 4.5 million shares sold. The initial…
A: The total direct cost of an Initial Public Offering (IPO) refers to the sum of all expenses incurred…
Q: suppose that you have a call option that is at 1.30. it has a Delta of .35 a Gamma of .06 a Theta of…
A: These terms collectively known as "Greeks" and they provide a way to measure the sensitivity of an…
Step by step
Solved in 3 steps with 2 images
- PLEASE ANSWER ASAP Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $50,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $165,000 saved, and he expects to earn 10% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent.1. Retirement Planning. A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8 percent interest on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year.b. How would the answer to part (a) change if the couple also realizes that in 20 years, they will need to spend $60,000 on their child’s college education?* Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $45,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has $75,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question…
- 6. If you desire to have $80,000 for a down payment for a house in 7 years, what amount would you need to deposit each year for these 7 years? Assume that your money will earn 10 percent per year. 7. Kate deposits $9,900 each yearinto her retirement account. If these funds have an average earning of 11 percent over the 40 years until her retirement, what will be the value of her retirement account?Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $35,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 6% per year from today forward. He currently has $125,000 saved and expects to earn a return on his savings of 10% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year,…NO2.5 Daryl wishes to save money to provide for his retirement. He is now 30 years old and will be retiring at age 64. Beginning one month from now, he will begin depositing a fixed amount into a retirement savings account that will earn 12% compounded monthly. Then one year after making his final deposit, he will withdraw $100,000 annually for 25 years. In addition, and after he passes away (assuming he lives 25 years after retirement) he wishes to leave in the fund a sum worth $1,000,000 to his nephew who is under his charge. The fund will continue to earn 12% compounded monthly. How much should the monthly deposits be for his retirement plan?
- Required Annuity Payments Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $50,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 3% per year from today forward. He currently has $150,000 saved and expects to earn a return on his savings of 7% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the…Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has $125,000 saved and expects to earn a return on his savings of 8% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning…Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $50,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 4% per year from today forward. He currently has $75,000 saved and expects to earn a return on his savings of 10% per year with annual compounding. How much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to…
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires—that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as GHȼ 40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that the real value of his retirement income will decline year by year after he retires.) His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has GHȼ 100,000 saved up; and he expects to earn a return on his savings of 8% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year,…# 13 → A couple is saving for retirement with three different accounts. The table below shows the current balances in their accounts, along with their yearly contribution, and the yearly return on each account. The couple will retire in 24.00 years and pool the money into a savings account that pays 4.00% APR. They plan on living for 29.00 more years and making their yearly withdrawals at the beginning of the year. What will be their yearly withdrawal? Yearly Contribution Account Fidelity Mutual Fund Vanguard Mutual Fund Employer 401k Balance $24,047.00 $195,517.00 $313,848.00 Submit Answer format: Currency: Round to: 2 decimal places. $1,000.00 $10,000.00 $15,000.00 APR 7.00% 7.00% 5.00%1. Your financial planner has advised you to initiate a retirement account while you are still young. Today is your 35th birthday and you are planning to retire at age 65. Actuarial tables show that individuals in your age group have a life expectancy of about 75. If you want a $50,000 annuity beginning on your 66th birthday which will grow at a rate of 4 percent per year for 10 years: a. What amount must you deposit at the end of each year through age 65 at a rate of 8 percent compounded annually to fund your retirement account? b. How would your answer change if the rate is 9 percent? ¢. After you have paid your last installment on your 65th birthday, you learn that medical advances have shifted actuarial tables so that you are now expected to live to age 85. Determine the base-year annuity payment supportable under the 4 percent growth plan with a 9 percent interest rate.