ou manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payout re going to closely resemble level perpetuities of $2.1 million per year. The interest rate is 10%. You plan to fully fu obligation using 5-year and 20-year maturity zero-coupon bonds. Required: . How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized posit ound intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Five-year Twenty-year Market Value million million
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- You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the funds are going to closely resemble perpetuities of $1 million per year. The interest rate is 9% per year. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. How much market value of each of the zero coupon bonds will be necessary to fund the plan if you desire an immunized position? Duration of a perpetuity is (1+y)/yConsider a pension plan that will pay $10,000 once a year for a 5-year period (5 annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the last payment in 9 years (at the end of year 9). a. What is the duration of the pension obligation? The current interest rate is 9% per year for all maturities. b. To generate the scheduled pension payments, the pension fund wants to invest the present value of the future payouts in bonds and match the duration of its obligation in part a). If the fund uses 5-year and 10-year zero-coupon bonds to construct its investment position, how much money (dollar amount) ought to be placed in each bond now? What should be the total face value (not current market value) of each zero coupon bond held? c. Right after the fund made its investment outlined in part b), market interest rates for all maturities dropped from 9% p.a.to 8% p.a. Show that the investment position constructed in part b) can still approximately fund the…8) Special Retirement PlanYou set up a retirement plan where you will invest $20,000 per year in an account with a guaranteed rate of return of ? = 0.05. The plan requires that you start investing immediately at year t=0, and make fifteen (15) additional payments of $20,000 in years t=1, t=2, ..., t=10. You make 11 investments in total. a. What will be the value of this stream of investments in year t=50? b. What is the maximum you can withdraw per year over the twenty (20) year period from t=51, t=52, ..., t=70? You have to withdraw the same amount each year. c. What is the maximum that you can withdraw per year forever if you start to make withdrawals in year t=51. You have to withdraw the same amount each year. 19)
- There are two investment options available for you. The first option requires you to invest 5,000$ in 1 year with 7% interest rate and collect your return in year 27. Second option requires you to put 500$ today with 11% interest rate and collect the fund in year 65. What is the compounding effect combination of these two investments? Select one: a.470,570 b.410,795 C.490,510 d.465,070(Use Calulator or Formula Approach) Suppose you invest $500 in a mutual fund today and $600 in one year. If the fund pays 9% annually, how much will have you in two years? How much will you have in 5 years if you make no further deposits?Suppose you retire with $1million at age of 65. You plan to invest your retirement into a mixture of a riky fund and a fixed income fund, where the return of the risky fund follows a normal distribution. You plans to withdraw $150,000 at the end of every year from this accout. To prevent overwithdrawal at the end, you put a safety cushion of 3 If balance of the retirement fund at the end of year, before annual withdrawal is less than 3 times the planned annual withdrawal amount, you withdraw one-third of the remaining balance. (Hint: use IF function) You want to find out how much you are left at the age of 75. Simulate one time to find out the remaining balance at the age of 17 ( 10 years later) Simulate 100 times, find out average, standard deviation, along with probabilty of the remaining fund is positive.
- You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.a) Explain the time value of money principleb) Identify the underlying assumption of the time value of money principlec) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.d) Suggest how you can minimize the amount of cash you must invest in order to reach your retirement goal.e) Compute the amount you will have at the end of the 45 years.f) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.You plan to use the 150,000 TL fund, which was idle for a year, in a time deposit account. The annual interest rate offers you receive from traditional and digital banks are as follows. Accordingly, calculate which option will give you the highest rate of return.NOTE: Provide a format and show your work (example: N = 6, PV = XXX, I = X%, etc.) It is now the year 2048 and you have amassed a retirement fund of $1.2 million. You want to retire in 13 years (year 2061). At the time, you plan to start withdrawing $20,000 per month.If your investment fund is invested at a 6.0 percent rate, how many months will it last you once you start to withdraw the money? (Assume monthly compounding. Do not round intermediate calculations and round your final answer to 2 decimal places.) Hint: draw a timeline to help visualize the problem.
- Suppose you have a financial investment opportunity for which if you invest $2,000 today, you will receive $100 per year for 3 years plus $2,500 in the third year. Is this worthwhile in financial terms if the interest rate on the best alternative use of the funds is 10% How would I plug this into a finacial calculator? usin N, I/Y, PV, PMT,FVYour financial advisor from Bluerock recommends you to invest in one of the plan. You want to compare and verify which of the following is the best investment option. Investment Plan A: Deposit $125,000 at the beginning and obtain $175,318.97 after 5 years.Investment Plan B: Deposit $243,000 at the beginning and obtain $319,771.42 after 7 years.Investment Plan C: Deposit $314,000 at the beginning and obtain $530,496.39 after 9 years. 1. Compute interest rate for all 3 plans. Which investment plan provides you the highest rate? 2. Your advisor updated the investment plan information yesterday. While the interest rate did not change for all 3 plans, future values of each investment are 210382.76, 415702.85, 742694.95, respectively. What would be the investment period for each plan? 3. Your advisor thinks it would be a good investment if you make an investment portfolio using all 3 investment plans suggested. He recommends investing in all 3 plans at year 0 and reinvest the money to…Suppose that a woman deposits $10,000 into an investment fund that guarantees to pay 0.5% interest everymonth. That is, interest is compounded monthly at a rate of 0.5% per month. a) What is the nominal annual interest rate? b) What is the effective annual interest rate? c) Assuming that no additional deposits or withdrawals are made, use the appropriate compound interestfactors to determine how much the fund will be worth:i) After 1 year;ii) After 2 years. d) Verify that your answers in parts (b) and (c) are correct by constructing a table or spreadsheet thatshows how the initial deposit will grow over 2 years. At a minimum, your table or spreadsheet shouldinclude a row for each interest period over a 2-year planning horizon and show: the value of in the investment fund at the start of each interest period the amount of interest earned each interest period; and the value of the fund at the end of each interest period.Be sure to briefly explain how your table or spreadsheet verifies…