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finance data bank




Question;Question 17 Your client is 40 years old and;wants to begin saving for retirement. You advise the client to put ? 5,000 a;year into the stock market. You estimate that the market's return will be, on;average, 12 percent a year. Assume the investment will be made at the end of;the year.;a. If;the client follows your advice, how much money will she have by age 65?;b. How;much will she have by age 70?Question 18 Jason has inherited ? 25,000 and;wishes to purchase an annuity that will provide him with a steady income over;the next 12 years. He has heard that the local savings and loan association is;currently paying 6 percent compound interest on an annual basis. If he were to;deposit his funds, what year-end equal pound amount (to the nearest pound);would he be able to withdraw annually such that he would have a zero balance;after his last withdrawal 12 years from now?="i1">="i1">="i1">="i1">uestion 19 You need to have ? 50,000 at the end of 10 years. To;accumulate this sum, you have decided to save a certain amount at the end of;each of the next 10 years and deposit it in the bank. The bank pays 8 percent;interest compounded annually for long term deposits. How much will you have to;save each year (to the nearest Pound)?="i1">="i1">="i1">Question 20 Louise wishes to borrow ? 10,000 for three years. A;group of individuals agrees to lend her this amount if she contracts to pay;them ? 16,000 at the end of the three years. What is the implicit compound;annual interest rate you receive (to the nearest whole percent)?="i1">="i1">21="i1">Calculate;the present value of the following cash flow stream. Assume that the stated;rate of interest is 14 percent per annum discounted semiannually.22National;Lottery has offered you the choice of the following alternative payments.Alternative 1: ? 10,000 one year from nowAlternative 2: ? 20,000 five years from now.a. Which;should you choose if the discount rate is 0 percent? 20 percent?;b. What;rate makes the options equally attractive? ="i1">="i1">="i1">="i1">="i1">


Paper#51192 | Written in 18-Jul-2015

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