Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- You are saving for retirement. To live comfortably, you decide you will need to save $3 Million by the time you are 65. Today is your 22nd birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 8%, how much must you set aside each year to make sure that you will have $3 Million in the account on your 65th birthday? The amount to deposit each year is _________ (Round to the nearest dollar.)arrow_forwardYour uncle is about to retire, and he wants to buy an annuity that will provide him with $7,100 of income a year for 15 years, with the first payment coming immediately. The going rate on such annuities is 15.25%. How much would it cost him to buy the annuity today?Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.arrow_forwardYour uncle is about to retire, and he wants to buy an annuity that will provide him with $97,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.45%. How much would it cost him to buy the annuity today? a. $1,192,059.14 b. $1,164,011.03 c. $1,195,837.87 d. $1,261,011.03 e. $1,227,449.63arrow_forward
- You buy an annuity, which will pay you $22,000 a year for twenty years. The payments are paid on the first day of each year. What is the value of this annuity today at a 8% discount rate?arrow_forwardYou have just won a lottery that promises an annual payment of $120000 beginning immediately. You will receive a total of 15 payments. If you can invest the cash flow in an investment that is paying 8% annually, what is the present value of this annuity?arrow_forward(Annuity interest rate) Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for $36,828.58 that will pay them $4,000 per year for 20 years. They don't have the slightest idea what return they would be making on their investment of $36,828.58. What rate of return would they be earning? The annual rate of return your folks would be earning on their investment is%. (Round to two decimal places.)arrow_forward
- You have a chance to buy an annuity that pays $1,000 at the end of each year for 5 years. You could earn 6% on your money in other investments with equal risk. What is the most you should pay for the annuity?arrow_forwardYou have a chance to buy an annuity that pays $5,700 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should Dav for the annuity? a $15,378.22 b. $16,454.70 c. $11,687.45 d. $14,763.09 e. $13.532.83arrow_forwardYou have just received a windfall from an investment you made in a friend's business. She will be paying you $26,016 at the end of this year, $52,032 at the end of next year, and $78,048 at the end of the year after that (three years from today). The interest rate is 11.4% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?arrow_forward
- Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular retirement income by purchasing an immediate annuity. His desired retirement income is $24,000 per year. The regular pay out is paid immediately on purchase of the annuity. The projected rate of return of the annuity product is 2.5%. To purchase the annuity today, how much Mr Chew would require a lump sum of?arrow_forwardYou just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity? $50,753 $59,195 $53,424 $62,311 $56,236arrow_forwardSuppose that Raphael is 35 years old and has no retirement savings. He wants to begin saving for retirement, with the first payment coming one year from now. He can save $20,000 per year and will invest that amount in the stock market, where it is expected to yield an average annual return of 10.00% return. Assume that this rate will be constant for the rest of his's life. In short, this scenario fits all the criteria of an ordinary annuity. Raphael would like to calculate how much money he will have at age 60. Use the following table to indicate which values you should enter on your financial calculator. For example, if you are using the value of 1 for N, use the selection list above N in the table to select that value. Input Keystroke Output N I/Y Input Keystroke Output 0 PV N Using a financial calculator yields a future value of this ordinary annuity to be approximately PMT Raphael would now like to calculate how much money he will have at age 65. I/Y FV 0 PV ? Use the following…arrow_forward
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