What is the required semiannual payment to nearest dollar

Assignment Help Financial Management

Reference no: EM13848955

Suppose that you are the manager of a newly formed retirement fund. You are to set up a series of semiannual payments to accumulate a sum of $1,000,000 in ten years. You assume that the appropriate interest rate for the period is 6 percent annual, compounded semiannually. The first payment into the fund will be made six months from today and the last payment will be at the end of the tenth year. If you use a financial calculator to solve, show all the input keystrokes and values entered.

a. What is the required semiannual payment, to the nearest dollar?

b. Suppose that immediately after the 4th payment is made at the end of the second year, interest rates have risen and you believe that the appropriate rate for the remainder of the period is now 8 percent annual. Assume that you can earn that rate on funds already accumulated and the 16 future payments. Interest is to be compounded semiannually on all funds. Calculate the revised payment that will allow you to reach your investment goal of $1 MM.

Reference no: EM13848955

Questions Cloud

Calculate the cost of such a call and price of a derivative : Assume the Black-Schools framework. Let S be a stock such that S(0) = 21, the dividend rate is δ = 0.02, the risk free rate is r = 0.05, and the volatility is σ = 0.2. Calculate the expected payoff of a 6 month call with strike price 17. Calculate th..

Corporate insiders earn abnormal profits on their trades : Do empirical studies support or reject the notion that corporate insiders earn abnormal profits on their trades? What about outside investors who mimic their trades? What forms of market efficiency, if any, are supported by these studies?

What will your monthly payments be : You want to buy a new sports coupe for $46,069, and the finance office at the dealership has quoted you an 8.4% APR loan for 5 years with monthly payments. What will your monthly payments be?

Retirement account plan : Starting next month, if you make monthly deposits of $436 into a retirement account that earns 4% interest compounded monthly, how large will your retirement account be in 29 years? (Do not include the dollar sign ($). Enter rounded answer as directe..

What is the required semiannual payment to nearest dollar : Suppose that you are the manager of a newly formed retirement fund. You are to set up a series of semiannual payments to accumulate a sum of $1,000,000 in ten years. You assume that the appropriate interest rate for the period is 6 percent annual, co..

Calculate the operating cash flows for the new project : (Calculating operating cash flows) Assume that a new project will annually generate revenues of $2,600,000 and cash expenses, (including both fixed and variable cost) of $900,000, while increasing depreciation by $210,000 per year. In addition, l the..

What is the annualized cost of forgoing the discount : If a firm buys trade credit terms of 4/15, net 60 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount ( assume a 360 -day year). The Annualized cost of trade credit terms of 4/15..

Face budgetary challenges on continual basis : Today, many companies face budgetary challenges on a continual basis. Two critical aspects that businesses lack are effective control practices and monitoring. What must happen in order for the company to succeed? What are the company’s most vulnerab..

Most challenging economic periods : The year 2008 ushered in one of the most challenging economic periods in U.S. history. The effects of prolonged unemployment and reduced asset values for homes and personal wealth continue to affect people’s potential to realize their personal wealth..

User Account

All Pages