In: Finance

Amelia currently has $1,000 in an account with an annual rate of return of 4.3%. She wants to have $3000 for a trip to Canada when she graduates in 4 years. How much will she have to save each month to afford her trip?

Information provided:

Future value= $3,000

Time= 4 years*12= 48 months

Interest rate= 4.3%/12= 0.3583% per month

The question is solved in two parts. First, the future value of $1,000 saved need to be calculated and secondly, the amount of monthly savings needs to be calculated.

The future value is calculated by entering the below in a financial calculator:

PV= -1,000

N= 4

I/Y= 4.3

Press the CPT key and FV to compute the future value.

The value obtained is 1,183.42.

Therefore, the value of $1,000 saved at the end of four years is $1,183.42.

The monthly savings is calculated by entering the below in a financial calculator:

FV= 3,000 - 1,183.42= $1,816.58.

N= 48

I/Y= 0.3583

Press the CPT key and PMT to compute the monthly savings.

The value obtained is 34.7516.

Therefore, she will have to save **$34.75** every
month for 4 years to afford the trip.

In case of any query, kindly comment on the solution.

One of IBM's bond issues has an annual coupon rate of 4.3%, a
face value of $1,000 and matures in 8 years.
What is the value (or price) of the bond if the required return
is 5%?
What is the value of the bond if the required return is 6%?
What is the value of the bond if the required return is 7%?

If you invest $1,000 into a savings account at an annual
interest rate of 3% (APR), compounded semi-annually, how much will
you have in the savings account after 14 years?

If you deposit $3700 today into an account earning an annual
rate of return of 11 percent, what would your account be worth in
30 years (assuming no further deposits)? In 35 years?

Calculate annual arithmetic rate of return and annual geometric
rate of return of stock A and B. Consider the data in table below,
which show the movements in price for two stocks over two
successive holding periods. Both stocks have a beginning price of
$10. Stock A rises to $40 in period 1 and then declines to $30 in
period 2. Stock B falls to $8 in period 1 and then rises to $25 in
period 2.

2. If you deposited $3500 today into an account earning an 11%
annual rate of return, what will your account be worth in 35 years?
(show your work) a. in 40 years? (show your work)

A $1,000 bond with annual coupon payments at 9% of par has an
expected return of 11% over the life of the bond, compute the value
of the bond at these times to maturity 12, 8, 5, 2 years ( and how
do i enter this information into an online bond yield to maturity
calculator)

On January 1, 2017, Smith deposits 1,000 into an account earning
nominal annual interest rate of i(4) = 0.04 compounded quarterly
with inter- est credited on the last day of March, June, September,
and December. If Smith closes the account during the year, simple
interest of 4% is paid on the balance from the most recent interest
credit date.
(a) What is Smith’s close-out balance on September 23, 2017?
(b) Suppose all four quarters in the year are considered equal,...

Amanda, age 25, currently has $10,000 in her savings account.
She figures that she can save $20,000 per year at the start of each
year (starting one year from now) indefinitely. She thinks that she
can earn an after-tax return of 8% on her investments. She wants to
have $1,000,000 at which point she will retire. How long will it
take her to achieve her goal? Round your answer to 1 decimal
point.

The internal rate of return (IRR) refers to the compound annual
rate of return that a project generates based on its up-front cost
and subsequent cash flows. Consider this case:
Blue Llama Mining Company is evaluating a proposed capital
budgeting project (project Delta) that will require an initial
investment of $1,450,000.
Blue Llama Mining Company has been basing capital budgeting
decisions on a project’s NPV; however, its new CFO wants to start
using the IRR method for capital budgeting decisions....

The internal rate of return (IRR) refers to the compound annual
rate of return that a project generates based on its up-front cost
and subsequent cash flows. Consider this case:
Purple Whale Foodstuffs Inc. is evaluating a proposed capital
budgeting project (project Delta) that will require an initial
investment of $1,450,000.
Purple Whale Foodstuffs Inc. has been basing capital budgeting
decisions on a project’s NPV; however, its new CFO wants to start
using the IRR method for capital budgeting decisions....

ADVERTISEMENT

ADVERTISEMENT

Latest Questions

- What is the treatment for schzophrenia condition? How was this disorder treated in the past? Has...
- Which of these are a case for Cultural Relativism? 1. Different societal contexts demand different moral...
- Annuity You are going to borrow money from the bank. But when considering your income, you...
- As you will learn, working in groups is no easy task! Hopefully, you will master some...
- An agronomist is conducting a field experiment to identify the best management practice for minimizing spread...
- What’s a firm’s market value? What are some factors driving a firm’s market value?
- Create the following positions based upon a job analysis: Mailroom clerk: Entry level for a long-term...

ADVERTISEMENT