Question

In: Finance

John Nautilus has $1,200,000 and wants to retire. What return must his money earn so he...

John Nautilus has $1,200,000 and wants to retire. What return must his money earn so he may receive annual benefits of $80,000 at the end of each year for the next 30 years?

5.22% A

5.72% B

8.24% C

10% D

Solutions

Expert Solution

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
$1200000= $80000[ 1-(1+i)^-30 /i]
1200000/80000 =[ 1-(1+i)^-30 /i]
15 =[ 1-(1+i)^-30 /i]
i=5.22%
Correct Option : A.5.22%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Your client John Smith is 45. He wants to retire at the age of 55. He...
Your client John Smith is 45. He wants to retire at the age of 55. He plans to sell his business sometime in the next five years and he is considering using the $100,000 proceeds from the sale to purchase an annuity. Explain to your client what an annuity does. Under what set of circumstances would the annuity be desirable to Smith? If the annuity is purchased, what features should it have with respect to guarantees? If Mr. Smith does...
Your client John Smith is 45. He wants to retire at the age of 55. He...
Your client John Smith is 45. He wants to retire at the age of 55. He plans to sell his business sometime in the next five years and he is considering using the $100,000 proceeds from the sale to purchase an annuity. Explain to your client what an annuity does. Under what set of circumstances would the annuity be desirable to Smith? If the annuity is purchased, what features should it have with respect to guarantees? If Mr. Smith does...
John has decided to organize his CD music collection. He wants to catalog his music by...
John has decided to organize his CD music collection. He wants to catalog his music by Album, Artist, Songwriter, and Song. An album is a compilation of songs. Songs are created when artists sing a song written by songwriters. John has noted that some songs appear multiple times in his catalog because they are on regular albums and compilation albums. a) Write all of the assumptions regarding the music catalog. b) Based on your assumptions, construct an ERD diagram. Be...
6. John has a car he wants to sell. His goal is to get as much...
6. John has a car he wants to sell. His goal is to get as much as he can for the car (profit-maximizer). He lists the car in the local paper with no price – just “highest bidder” and announces a time to come by if interested. 3 potential buyers show up. Paul is willing to pay $1,000 for the car. George is willing to pay $2,000 for the car. Ringo is willing to pay $8,000 for the car. George...
william brown is 30 years and wants to retire when he is 65. so far he...
william brown is 30 years and wants to retire when he is 65. so far he has saved (1) $6,240 in an ira account in which his money is earning 8.3 percent annually and (2) $5,630 in a money market account in which he is earning 5.25 percent annually. william wants to have $1 million when he retires. starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in...
Your uncle has $300,000 today. Assume he can earn 9.18% on his investments. He now wants...
Your uncle has $300,000 today. Assume he can earn 9.18% on his investments. He now wants to retire in 10 years. Here is his situation: a. He wants to withdraw $35,000 every two years, beginning 12 years from today for 10 equal, every two-year (i.e. every other year) withdrawals. b. He has to pay for his daughter’s college beginning in 5 years at $20,000 for four years (i.e. he has to make a payment in year 5, 6, 7, and...
Mr. X wants to save money to meet three objectives. First, he wants to retire after...
Mr. X wants to save money to meet three objectives. First, he wants to retire after 30 years, and for the subsequent 25 post-retirement years, he wants to have an income of $20,000 per month, with the first post-retirement income received 30 years and one month from now. Second, he wants to buy a vacation cabin in 10 years at an estimated cost of $375,000. Third, at the end of 25 years of retirement, he wants to have $2 million....
   Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants...
   Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, starting at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account. For how many years can he make the $35,000 withdrawals and still have $25,000 left in the end? a. 12 years b. 16 years c. 15 years d. 17...
________1. Randy Hill wants to retire in 10 years with $500,000. He can earn 6% per...
________1. Randy Hill wants to retire in 10 years with $500,000. He can earn 6% per year on his investments. Compute how much he needs to deposit each year to reach his goal. ________2. Joe Morris wants to start a savings fund from which his grandson could withdraw $3,000 a year for 10 years. The fund would earn 5% interest. Compute the amount Joe would have to deposit now to reach his goal. ________3. Your rich aunt has offered to...
Beckett Organics John Beckett enjoys vegetables, so much so that he has given up his full-time...
Beckett Organics John Beckett enjoys vegetables, so much so that he has given up his full-time job as a lawyer to concentrate on growing and marketing organic vegetables. He started growing vegetables 20 years ago in his back garden and eventually became fully self-sufficient in supplying vegetables for the family. Partly bored with his legal job and tempted by an attractive severance package, John decided he would try to establish his own vegetable supply business. Eighteen months ago he looked...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT