You’ve inherited $10,000. You’d like to have $20,000 in 5 years. What rate of return do...

You’ve inherited $10,000. You’d like to have $20,000 in 5 years. What rate of return do you need to make on your investment to reach your savings goal?

You’re interested in buying a house and need a $5,000 down payment. How much do you need to set aside today if you can make 5% on your money to make sure you have $5,000 in three years.

You’ve decided you want to get your MBA, which will cost you $15,000. If you have $10,000 now and can make 7.5% on your money, how soon can you attend classes?

You’ve just been hired on your first job! Congratulations. The company has a 401(k) plan and you’ve decided to put 10% of your $45,000 salary away each year. If you can earn 8% annually on your money, how much will you have 35 years from now when you’re ready to retire?

You’re aunt Edna just retired at the age of 65 years old. She has an annuity with $750,000 and wants to begin taking payments until she’s 90 years old. If the annuity can earn 4.5% annually, how much can she take each year before the account gets to $0?

You have to choose between investing your $1000 in a band CD that pays 2.5% annually, or into a 20 year treasury bond that pays 2.2% semi-annually. Which investment pays a better rate of return?

Expert Solution

You’ve inherited $10,000. You’d like to have $20,000 in 5 years. Rate of return you need to make on your investment to reach your savings goal.

Ans: The annual rate of interest of 20% is required. (It is assumed that the rate of interest is simple average rate of interest).

You’re interested in buying a house and need a $5,000 down payment. How much do you need to set aside today if you can make 5% on your money to make sure you have $5,000 in three years.

Ans : Assuming 5% is simple interest annually. The amount required to be invested currently is $4320. Which at the end of 3 years, with 5% interest rate calculated annually sums up to $5000.

You’ve decided you want to get your MBA, which will cost you $15,000. If you have $10,000 now and can make 7.5% on your money, how soon can you attend classes?

Ans: It will take 5 years and 5 months to get the admissions and attend the classes. It can be calculated with the following formula:

A=P(1+r/n)tn

You’ve just been hired on your first job! Congratulations. The company has a 401(k) plan and you’ve decided to put 10% of your $45,000 salary away each year. If you can earn 8% annually on your money, how much will you have 35 years from now when you’re ready to retire?

Ans: This can be solved with the following formula:

S=R (1+i)^n-1/i (1+i)

jeff jeffy answered 1 day ago

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