Reference no: EM132561900

Question -

a) Your uncle has passed away leaving you $50,000 to be delivered in five years. An attorney offers you $35,000 today for an assignment of the trust in exchange of money which you will receive in 5 years. If your required rate of return is 10%, should you agree to the deal or not. Give reason of your answer.

b) Assume that 4 years from now you will need $1,000. Your bank compounds interest at an 8% annual rate.

i. How much must you deposit 1 year from now to have a balance of $1,000 at Year 4?

ii. If you want to make equal payments at the end of Years 1 through 4 to accumulate the $1,000, how large must each of the 4 payments be?

iii. To help you reach your $1,000 goal, your father offers to give you $400 after 1 year. You will get a part time job and make 6 additional payments of equal amounts each 6 months thereafter. If all of this money is deposited in a bank which pays 8%, compounded semiannually, how large must each of the 6 payments be?

c) You estimate that you would be needing $90,000 to send your daughter to University in nine years. You have about $20,000 now. If you can earn 15 % per year, will you make it? At what rate will you just reach your goal?