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Accounting Question




Question;1;Rebecca has developed a financial retirement;strategy. Her strategy is to invest in;somewhat risky stocks for 15 years and then move everything to low risk bonds;for the retirement years as described below.;She presently has $250,000 in a retirement account that will be;invested in a stock fund that has historically earned 12% annually (EAR) with;no dividends. The plan is to add an;additional $25,000 to the fund at the beginning of each of the upcoming 15;years.;When she retires, she will reinvest the stock fund in a tax-free;municipal bonds and live on the coupons only that have a coupon rate of 2.5%;paid semi-annually. (the bonds will;be donated to charity upon her death).;How much will She receive semi-annually during retirement?;2;Belinda is starting;a company with an investment of;$500,000. She expects sales to grow;arithmetically by $100,000 a year for five years, with sales in year 1 being;$100,000, year 2 $200,000, etc.. Then for years 6-10 sales are forecast to;grow geometrically at a rate of 30% per year (year 6 sales grow 30% over year;5, year 7 30% over year 6, etc.);At the end of each year, for years 1-10, Kay expects profits to;be al least 10% of the sales each year;and she will invest 10% of profits in a fund that earns 6% APR compounded;monthly.;a;What will be the value;of the invested funds in year 10?;b;Did the 10 years of;profits cover her initial investment?;3;Jim won $250,000 in a lottery that he wantsg to;invest. He narrowed;his search to three funds that each have different stated rates. How much will Jim accumulate in 30 years;for each of the three investment alternatives?;a;6.15% APR with monthly;compounding;b;0.50% monthly PIR;c;6.25% EAR


Paper#41483 | Written in 18-Jul-2015

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