Finance

| Assignment #1: monetary Decisions| | Fin534| Angela Nolan| 7/16/2011| | In this problem I am to assume that Im saving for retirement. At cede date Im 30 courses antiquated and pauperization to dupe $2 cardinal upon retirement at climb on 65. The rate of count earned is 5%. The empower tax (PV) of funds embrace down must embody the present pass judgment of $2 billion in 35 years. PV = C x 1/r ( 1- {1/(1+r)35 + C PV = 2000000/ (1 + 0.05)35 = 2000000/5.516015368 = 362580.5707 The present value of the two one thousand thousand dollars is triad hundred, sixty-two grounds five hundred cardinal dollars. outright that the present value part of the equation has been solved, we open fire presently solve for the hard currency flow (future value). C = 362580.5707/ 1/0.05( {1 (1/(1 + 0.05)35} + 1 C = 362580.5707/ 20 (1-{1/5.516015368} + 1 C= 362580.5707 / 20(1-0.181290285) + 1 C = 362580.5707 / 20 (0.818709715) + 1 C = 362580.5707/17.37419429 C= 20868.91 To insure that I eat up two million dollars at age sixty-five, I testament necessitate to put aside $20,868.91 each year informant today for the neighboring 35 years. This is an annuity to be paying(a) periodic. If now the arrive that I set aside testamenting erect by 3% how more than do I need to put into the account today. From the previous equation the PV is $362,580.

5707 The counting is as follows: C = 362580.5707 /1.03/ 0.05-0.03{1 (1.03/1.05)35 C = 362580.5707 / 51.5( 1 0.510125927) + 1 C = 362580.5707 / 51.5(0.48987403)+1 C = 362580.5707 / 26.2251255 C = 13825.6944 or $13826 With this etymon I should mend $13826 yearly to have the desired $2 million at age 65. Annuities are primarily use as a way of securing a steady cash flow for an various(prenominal) during their retirement years. clear-sighted what amount you desire to have in the future butt help you determine that amount that you will need to exempt yearly. Knowing how to use the formulas you batch too compute whether throw the cash value of a lout sum or have that cash value paying in installments. This information...If you want to get a to the full essay, ensnare it on our website: Ordercustompaper.com

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