How much would bill have to invest today

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Question - Over the past few? years, Microsoft founder Bill? Gates' net worth has fluctuated between? $20 billion and? $130 billion. In early? 2006, it was about? $26 billion-after he reduced his stake in Microsoft from 21 percent to around 14 percent by moving billions into his charitable foundation. ? Let's see what Bill Gates can do with his money in the following problems.

a. ?Manhattan's native tribe sold Manhattan Island to Peter Minuit for ?$24 in 1626. ? Now, 387 years later in? 2013, Bill Gates wants to buy the island from the? "current natives." How much would Bill have to pay for Manhattan if the? "current natives" want a 5 percent annual return on the original ?$24 purchase? price?

b. Bill Gates decides to pass on Manhattan and instead plans to buy the city of? Seattle, Washington?, for ?$50 billion in 9 years. How much would Bill have to invest today at 8 percent compounded annually in order to purchase Seattle in 9 ?years?

c. Now assume Bill Gates only wants to invest half his net worth? today, ?$13 ?billion, in order to buy Seattle for ?$50 billion in 9 years. What annual rate of return would he have to earn in order to complete his purchase in 9 ?years?

d. Instead of buying and running large? cities, Bill Gates is considering quitting the rigors of the business world and retiring to work on his golf game. To fund his? retirement, Bill would invest his ?$20 billion fortune in safe investments with an expected annual rate of return of 8 percent. He also wants to make 45 equal annual withdrawals from this retirement fund beginning a year from? today, running his retirement fund to? $0 at the end of 45 years. How much can his annual withdrawal be in this? case?

Reference no: EM133143337

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