Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Use the savings plan formula to answer the following question.
You put
$300
per month in an investment plan that pays an APR of
2.5%.
How much money will you have after
17
years? Compare this amount to the total deposits made over the time period.After
17
years the investment plan will contain blank ?The total deposits made over the time period is?
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- Suppose you want to have $700,000 for retirement in 30 years. Your account earns 10% interest. a) How much would you need to deposit in the account each month? $ b) How much interest will you earn? $ esarrow_forwardSuppose that you’d like to retire in 40 years and you want to have a future value of $ 1000000 in a savings account. Also suppose that your employer makes regular monthly payments into your retirement account. If you can expect an APR of 6.5% for your account, how much do you need your employer to deposit each month? Employer Contribution = The formulas we have been using assume that the interest rate is constant over the period in question. Over a period of 40 years, though, interest rates can vary widely. To see what difference the interest rate can make, let’s assume a constant APR of 5% for your retirement account. How much do you need your employer to deposit each month under this assumption? Employer Contribution =arrow_forwardSuppose you have a different option to deposit $500 in a savings account at the beginning of each year for 5 years. How much would you have if the account paid 4.25%?arrow_forward
- At the moment you don't have any money saved for retirement, but have resolved to start making $425 monthly payments (starting one month from today) into an account expected to earn an effective annual rate of 9.9%. Given that plan, how many years will it take for you to accumulate $2.4 million? (Use excel or a financial calculator)arrow_forwardAn 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:arrow_forwardYou decide to set aside $120 a month for your future. Assuming a real interest rate of 7.5%, how much will you have after 25 years? How much more would you have if you invested for 30 years?arrow_forward
- One can solve for payments (PMT), periods (N), and interest rates (1) for annuities. The easiest way to solve for these variables is with a financial calculator or a spreadsheet. Quantitative Problem 1: You plan to deposit $2,100 per year for 4 years into a money market account with an annual return of 3%. You plan to make your first deposit one year from today. a. What amount will be in your account at the end of 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ b. Assume that your deposits will begin today. What amount will be in your account after 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ Quantitative Problem 2: You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $95,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 12% annually. a.…arrow_forwardWells Fargo offers a new savings product: You make the following payments over the next 5 years and will then receive a lump sum payment 25 years from now. Year Payment 1 300 2 400 3 500 4 600 5 700 The annual interest rate is 7% for the next 5 years, then 2% for the following 20 years. What is the future value of your investment in year 25?arrow_forwardPlease provide the steps to solving this problem using a financial calculator: You just opened a brokerage account, depositing $3,500. You expect the account to earn an interest rate of 9.652%. You also plan on depositing $4,500 at the end of years 5 through 10. What will be the value of the account at the end of 20 years, assuming you earn your expected rate of return?arrow_forward
- Give typed solution only If you put $200,000 into your investment account now for 10 year at 5% annual interest, what is the difference in interest income between simple interest calculation and compound interest calculation?arrow_forwardYou would like to contribute to a savings account over the next three years in order to accumulate enough money to take a trip to Europe. Assume an interest rate of 20%, compounded quarterly. How much will accumulate in three years by depositing $560 at the beginning of each of the next 12 quarters? Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (EV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Table, Excel, or calculator function Payment: Future Value: n= FVAD of $1 $ 560 12 5.0%arrow_forwardIf you save $1298 per year for the next 17 years and earn 7.2% interest on your savings, how much will you expect to have at the end of 17 years? Assume deposits are made at the beginning of each year. Give your answer in dollars to the nearest one dollar.arrow_forward
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