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FIN401 LASA 1 ? The Time Value of Money




Question;FIN401 LASA 1 ? The Time Value of MoneyAssignment 2: LASA 1?The Time Value of Money;submit a 4-5 page report based on the following;problem;Mary has been working for a university for almost 25 years and is now;approaching retirement. She wants to address several financial issues before;her retirement and has asked you to help her resolve the situations below. Her;assignment to you is to provide a 4-5 page report, addressing each of the;following issues separately. You are to show all your calculations and provide;a detailed explanation for each issue.;Issue A;For the last 19 years, Mary has been depositing $500 in her savings account;which has earned 5% per year, compounded annually and is expected to continue;paying that amount. Mary will make one more $500 deposit one year from today.;If Mary closes the account right after she makes the last deposit, how much;will this account be worth at that time?;Issue B;Mary has been working at the university for 25 years, with an excellent record;of service. As a result, the board wants to reward her with a bonus to her;retirement package. They are offering her $75,000 a year for 20 years, starting;one year from her retirement date and each year for 19 years after that date.;Mary would prefer a one-time payment the day after she retires. What would this;amount be if the appropriate interest rate is 7%?Issue C:Mary?sreplacement is unexpectedly hired away by another;school, and Mary is asked to stay in her position for another three years. The;board assumes the bonus should stay the same, but Mary knows the present value;of her bonus will change. What would be the present value of her deferred;annuity?;Issue D;Mary wants to help pay for her granddaughter Beth?s education. She has decided;to pay for half of the tuition costs at State University, which are now $11,000;per year. Tuition is expected to increase at a rate of 7% per year into the;foreseeable future. Beth just had her 12th birthday. Beth plans to start;college on her 18th birthday and finish in four years. Mary will make a deposit;today and continue making deposits each year until Beth starts college. The;account will earn 4% interest, compounded annually. How much must Mary?s;deposits be each year in order to pay half of Beth?s tuition at the beginning of;each school each year?;Turn;in your completed work to the M3: Assignment 2 Dropboxby Wednesday;October 23, 2013.;Assignment 2 Grading;Criteria;Maximum Points;Calculated the;compounded interest over 20 years and evaluated the value of the savings;account upon closing. (CO 1);32;Calculated the bonus;payout over 20 years vs. a one time payout with interest and distinguished;which bonus option would be better for the client. (CO 1);32;Calculated the present;value of the bonus and analyzed the difference in bonus for the client. (CO;2);32;Analyzed the tuition;costs for the client and determined what the future costs will be and;determined how these funds can be accumulated over time. (CO 4);60;Written Components;Organization, usage and mechanics, APA elements, style;44;Total;200


Paper#51427 | Written in 18-Jul-2015

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