Following the birth of a child, a parent wants to make an initial investment Po that will grow to $50,000 for the child’s education at age 17. Interest is compounded continuously at 5%. What should the initial investment be? Such an amount of called the present value of $50,000 due 17 years from now. The present value is about $?

An example of how to calculate net present value is done using the following. Imagine you have been given an investment opportunity wherein if you invest $1,200 today, you will receive $650 dollars at the end of each year for the next 5 years. You could separately choose to invest your money at 10% interest each year. Should you take the investment opportunity? To find the answer, use the NPV formula:

Your finance advisor offers you an investment that promise $200000 in 15 years from now. He said that you will need to contribute an initialinvestment of $45,000 now. Required:a. What rate of interest was used in the computation of this investment offerassuming the rate is compounding annually?b. If you wish to retire in just 10 years from now with the same $200 000and the rate of return is 12%, how much money would you need to invest now?c. If you wish to retire with $250 000, using the same initial investment of$45 000 and the rate of return of 15%, how long will you need to wait beforeyou can retire?

1. You decide to give SCU an endowment that will pay out $50 K per year forever,with a continuously compounded annual increase of 3%. Assuming that you canlock in an interest rate of 5%, gure out how much this endowment would cost.What is the total value of this income stream? 2.Suppose Aunt Grace wanted to give annual increases of $2,000 per year. How would this change the computations above? Give values for the amount Aunt Grace would have to pay to fund the income stream for 25 years, 50 years, 100years, 200 years, and forever. (Hint: You need only integrate by parts once.) 3. In addition to the $1 M already deposited there by Aunt Grace, how much would Aunt Margaret have to add to the fund to enableit to pay out an income stream ofR(t) = 60 +t forever?