What is the present worth of this inheritance? b) Due to high liquidity interest rate have dropped to 4%. What will be the impact on the present worth of this inheritance as a consequence of the market change?
2. Your grandfather left an inheritance for you of $100,000. However you can only drawdown on the investment as follows:
Years 1 – 3 $15,000 each year
Year 4 to 6 $10,000 each year
Year 7 $25,000
Interest on the fund is 5%.
a) What is the present worth of this inheritance?
b) Due to high liquidity interest rate have dropped to 4%. What will be the impact on the present worth of this inheritance as a consequence of the market change?
2. Consider Donald and Joe who are both 30- years of age and recently graduated with a degree in Finance. Both Donald and Joe plan to retire at age 67, and the retirement plan pays a 12 percent 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. Joe however does not plan to begin investing until 10 years after Donald begins to invest. How much will each of the newly grads have at retirement?
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