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Calculate the present value of the payment package

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Reference no: EM133039875

Jenny decided to do the following things after completion of her finance degree at Holmes Institute:

  1. Putting an exact amount of money in to Smart Investment Fund at the beginning of each year to have a saving of $800,000 for her retirement in 25 years from now. The average rate of return provided by this investment fund is 11% per year. 
  2. Having solar panels installed on her house roof for saving monthly electricity expense.
  3. Saving extra monthly income in to a bank account that allows flexibility when she needs cash and at the same time provides interest income for any existing balance.

Required:

  1. How much money should Jenny put into her investment fund account at the begining of each year to reach her saving target in 25 years from now?
  2. The solar panel provider offers her a payment package of $100/month at the end of each month for 3 years. Given the interest rate is 3.5%, calculate the present value of the payment package?
  3. Jenny is considering offers from two banks for her saving account. Bank A offers the interest rate of 2.54% per year, compounding semi-annualy. Bank B offers the interest rate of 2.53% per year, compounding daily. Help Jenny choose the better Bank by calculating Effective Annual Interest Rate (EAR).

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Reference no: EM133039875

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