Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Question
Chapter 2, Problem 4DTM
Summary Introduction
To calculate: the future value of the fund.
Introduction:
Expert Solution & Answer
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A) Ms. Diana wants to take off next three years of work to travel around the world. Sheestimates her average annual cash need is $20,000. If she needs more funds, she will arrangefrom alternative ways i.e. taking loans or doing some odd jobs etc.Ms. Diana believes that she can invest her savings at 10% until she depletes her funds.You are required to find out how much she should invest now to fund her future cashflow if she is able invests at 10% annually OR what amount she has to invest if she onlyearns 7% annually.The relevant factors from table you will need for this calculation are given below.a) Future value interest factor for a one-dollar annuity compounded from the table at 10% is3.3100 and at 7% is 3.2149 on period#3b) Present value interest factor for a one-dollar annuity discounted from the table at 10% is2.4869 and at 7% is 2.6243 on period#3B) What is the difference between Present value & Future value?___________________________________________
(Solving for r with annuities)
Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent, who believes that Nicki is an older woman ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her an annual fixed income. The annuities are as follows
If Nicki could earn 11 percent on her money by placing it in a savings account, should she place it instead in any of the annuities? Which ones, if any? Why?
a. What rate of return could Nicki earn on her money if she place it in annuity A with
$6500 payment per year and 16 years duration?
(Solving
for r with
annuities)
Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent, who believes that Nicki is an older woman ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her an annual fixed income. The annuities are as follows in the popup window:
LOADING...
.
If Nicki could earn
11
percent on her money by placing it in a savings account, should she place it instead in any of the annuities? Which ones, if any? Why?
a. What rate of return could Nicki earn on her money if she place it in annuity A with
$7,000
payment per year and
10
years duration?
nothing%
(Round to two decimal places.)
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Data Table
ANNUITY
INITIAL
PAYMENT INTO
ANNUITY
(AT t = 0)
AMOUNT OF
MONEY
RECEIVED PER
YEAR
DURATION
OF ANNUITY
(YEARS)
A
$40,000…
Chapter 2 Solutions
Personal Finance (MindTap Course List)
Ch. 2.1 - Prob. 1CCCh. 2.1 - Prob. 2CCCh. 2.1 - Prob. 3CCCh. 2.1 - Prob. 4CCCh. 2.2 - Is college worth the cost? Why or why not?Ch. 2.2 - Prob. 2CCCh. 2.2 - Prob. 3CCCh. 2.3 - Prob. 1CCCh. 2.3 - Give examples of how to identify specific job...Ch. 2.3 - Prob. 3CC
Ch. 2.3 - Explain how to compare salary and living costs in...Ch. 2.3 - Prob. 5CCCh. 2 - Economic Trade-off of Graduate School. Jessica...Ch. 2 - Prob. 2DTMCh. 2 - Prob. 3DTMCh. 2 - Prob. 4DTMCh. 2 - Prob. 1FPCCh. 2 - Prob. 2FPCCh. 2 - Prob. 3FPCCh. 2 - Prob. 4FPCCh. 2 - Prob. 5FPCCh. 2 - Cover Letter. Review Figure 2-6 on page 59 and...Ch. 2 - Prob. 6AIP
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