How much would you need to have in your fund when you retire

Reference no: EM133368680

Questions:1. The present value of an annuity A is $845. Annuity B is identical in every way to annuity A, with the exception that the first payment occurs today rather than at the end of the first period. The discount rate is 6% per period. What is the present value of annuity B?

Enter your result to the nearest dollar.

2. You plan to invest $10,000 into your new savings account the end of the year for the next 10 years. The interest earned in the account is 8% per year.

How much do you expect to have in the account at the end of 10 years?

Hint: work out the PV of the investment (an annuity), and take the future value of this amount. Alternatively, use the formula for the future value of an annuity from the slides.

A. $100,000

B. $108,000

C. $67,101

D.$144,866

3. You would like to have enough money saved in your retirement fund in order to receive $118,000 per year, so that you and your family can lead a good life. The fund behaves as a perpetuity with growth. The payments will start one year from the date of your retirement. The interest rate is 9% per year and the growth rate of the payments will be 2% per year.

How much would you need to have in your fund when you retire to achieve this goal?

Enter your answer as a whole number of dollars.

Reference no: EM133368680

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