Nick Suzuki, 23, newly named captain of the Montreal Canadiens, recently signed an 8-year, $63 million contract($7,875,000 per year for 8 years, with equal installments paid at the end of each month). If Nick spends only $20,000per month over the life of his contract, investing the rest into an investment paying 5% compounded quarterly, howmuch will he have available to spend every month if he retires at the end of his contract and lives to age 80? (Assume hecontinues to earn 5% compounded quarterly on his funds).

This is a question based on the concept of time value of money (TVM). We will be using the popular…

Answered: Nick Suzuki, 23, newly named captain of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Professor’s Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $350,000 at age 65, the firm will pay the retiring professor $2,800 a month until death. If the professor’s remaining life expectancy is 30 years, what is the monthly rate on this annuity? What is the effective annual rate?
Ford Motor Company is considering an early retirement buyout package for some employees. The package involves paying out today's fair value of the employee's final year of salary. Shelby is due to retire in one year. Her salary is at the company maximum of $72,000. If prevailing interest rates are 6.75% compounded monthly, what buyout amount should Ford offer to Shelby today
David wants to retire in 40 years. If he puts away $300 per quarter, at the end of each quarter, into an account earning 5.5% compounded quarterly, how much will he have when he retires?
Petrogazz convinced Mae Luna to play for their volleyball franchise for 3 seasons. They offered the player $1,000,000 in the 1st year, $2,500,000 in the 2nd year, and $3,000,000 in the 3rd year. Assuming end of year payments of the proceeds of the contract, how will we find the value of his contract today if Mae Luna has a discount rate of 12%, compounding semi-annually?
Luis has $170,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until his retirement 30 years from now. If the new account earns interest at the rate of 4.5%/year compounded quarterly, how much will Luis have in his account at the time of his retirement? (Round your answer to the nearest cent.)
Chelsea's current annual salary is $60,000. This salary is expected to increase by 4% each year. At the end of each year for the next 20 years, Chelsea plans to deposit 10% of her annual salary in a retirement account is paying 6% interest compounded monthly. Determine the amount Chelsea will have in the account at the end of the 20 years.
14-81 Joan earns a salary of $110,000 per year, and she expects to receive increases at a rate of 4% per year for the next 30 years. She is buying a home for $380,000 at 7% for 30 years (under a special preference loan with 0% down). She expects the home to appreciate at a rate of 3% per year. She will also save 10% of her gross salary in savings certificates that earn 5% per year. Assume that her payments and deposits are made annually. If inflation is assumed to have a constant 5% rate, what is the value (in Year-1 dollars) of each of Joan's two investments at the end of the 30-year period? Use a before-tax analysis.
Condiser Donald and Joe who are both 30 years of age and recently graduated with a degree in Finance. Both Donal and Joe plan to retire at age 67 and the retirement plan pays a 12% per annum return and is also compounded monthly. Donald plans to invest $1,000 per month beginning next month into his retirement account while Joe shall invest $2,000 per month. However Joe does not plan to begin investing until 10 years after Donald begins to invest. How much willeach of the newly grads have at retirement?
22. Marcia Kincaid has just begun working for a company that offers a pension plan. This plan guarantees 5.4% per year compounded monthly. She wants to retire in 35 years and then collect $5400 per month for 20 years. How much must she and her company together deposit in the account at the end of each month?
Caroline has just turned 22 and has begun her first job. Her first year’s salary is $60,000per year, which is paid monthly ($5,000 per month). For planning purposes:•Her future annual salary will grow at a rate of 4% per year.•She will work for 40 years and retire on her 62th birthday.•She will receive a pension payment each year for 30 years beginning on her 62thbirthday.•Accounting for inflation, her first pension payment should be $150,000.•Her pension payments should increase at a rate of 2.5% per year.•She has decided to withdraw 100p% from her monthly paycheck.•She wants to use a 6% EAR as an appropriate interest rate.What is the minimum value for p (to the nearest whole percent) to fund Caroline’s plan?Ignore taxes for this analysis.
Icahn Tackle just signed an $11.5 million, 4-year contract with an NFL team. He received a signing bonus of $2 million; $1.5 million at the end of year 1; $3 million at the end of year 2; $3.5 million at the end of year 3; and $1.5 million at the end of year 4. What is the present value of his contract if money can earn 4 percent per year?
Joe's starting salary as a mechanical engineer is around $100,000. Joe is planning to place a total of 8% of his salary each year in the mutual fund. Joe expects a 5% salary increase each year for the next 30 years of employment. If the mutual fund will average 9% annual return over the course of his career, what can Joe expect at retirement?

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