Finance questions about the time value of money, and the present value of a single amount:...

Finance questions about the time value of money, and the present value of a single amount:

1.a) Rossie received $17,000 from an inheritance, and he wants to invest it for the next 18 years. If he can earn 9.5% annually after tax, how much will his account be worth at the end of 11 years?

b) Joneisha needs a total of $700,000 in 10 years to pay for 4 years of college for her granddaughter. If she can earn 7.5% annually after tax on her growth mutual fund set aside for this purpose, what single amount does Joneisha need to invest today?

Solutions

Expert Solution

Value at the end of year 11 = 17,000(1.095)¹¹

Value = $46,132.21

Single Amount = 700,000/(1.075)¹⁰

Single Amount = $339,635.75

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Finance- Time Value of Money

You believe you will need to have saved $500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6 percent per year, how much must you save each year to meet your retirement goal?

Time Value of Money Overview: In corporate finance, students need to be able to calculate present...

Time Value of Money Overview: In corporate finance, students need to be able to calculate present and future values of investments. Purpose: The purpose for this project is to demonstrate an understanding of how to calculate present and future values. Requirements: Review the examples then answer all of the questions below. Example 1: What is the present value of the $800 to be received 10 years from now discounted back to the present at 10%. Use your financial calculator to...

Think about the six principles of finance covered in this unit (time value of money, risk...

Think about the six principles of finance covered in this unit (time value of money, risk and return, diversification, market efficiency, management versus owner perspectives, and reputation). After reviewing each principle, which do you think stands out as the most important and which is the least important? Explain. Would your answer change if you were the stockholder of the company versus the manager of the company? Why, or why not?

The value or amount of Money at some future time

APPLY THE CONCEPTS: Present value of a single amount in the future As it is important...

APPLY THE CONCEPTS: Present value of a single amount in the future As it is important to know what a current investment will yield at a point in the future, it is equally important to understand what investment would be required today in order to yield a required future return. The following timeline displays what present investment is required in order to yield $8,000 three years from now, assuming annual compounding at 5%. Future Value: $8,000 Year 1 Year 2...

Managerial Finance Learning Objective: Calculate the time value of money Activity: Using the time value of...

Managerial Finance Learning Objective: Calculate the time value of money Activity: Using the time value of money (TVM) principles develop a retirement calculator using the following steps. Submit an Excel file showing your calculations and answers to the questions below. Step 1: Calculate the future value of the money you will need. How old are you now? 22 At what age do you want to retire? 60 Assume you will live until the age of 90. In today's dollars, how...

Question