Reference no: EM132468233

Using the time value of money tables provided in the textbook or a financial calculator, calculate solutions for the following problems.

Example Question

Jane Smart wishes to partially finance her son's university education. She will contribute $2,000 per year into investments returning 6% per annum for the next 12 years. How much in total will Jane be contributing to her son's education?

Example Solution

Show your work as in either (i) or (ii).

i. $2,000 x 16.870 (FV Annuity 6%, 12 yrs) = $33,740

or 

ii. Calculator (TI BA II +): 12 N, 6 I/Y, -$2,000 PMT, FV = $33,740 (rounded)

1. Kristen deposits $1,000 into a GIC paying 4% per annum. What is the future value of the GIC if it is left untouched for 5 years?
2. Stacey and Steven will need $20,000 to pay for their wedding in 3 years' time. They can earn a return of 3% per annum. How much will they need to deposit in a lump sum amount today (present value) so that they will have the funds needed to pay for the wedding?
3. Every year end, Triton invests $3,000 in Canadian growth stocks via his mutual fund for retirement savings. If Triton averages a 10% annual return and plans to retire 30 years from now, how much will he have in his mutual fund at retirement? (Solve for future value of an annuity.)
4. Tim is 25 years old and plans to retire at age 65. He wishes to have a $500,000 lump sum available at retirement to cover annual living expenses beyond his pension income. If Tim invests in the stock markets and receives an average return of 9% per annum, how much would he have to deposit each year to save up the desired $500,000?