Question

In: Finance

What’s the future value of the initial $100 deposit after 10 years? We assume current interest...

What’s the future value of the initial $100 deposit after 10 years? We assume current interest rate is = 6%, compounded monthly.

a. $121.0

b. $161.6

c. $181.9

d. $223.4

You want to receive $5,800 per month in retirement. If you can earn 0.8% return per month and you expect to need the income for 30 years, how much do you need to have in your account at retirement?

$585,123

$599,513

$626,783

$683,833

Solutions

Expert Solution

FV= PV*(1+r)^n
Where,
FV= Future Value
PV = Present Value
r = Interest rate =6%/12 =0.5%
n= periods in number =10*12 =120
= $100*( 1+0.005)^120
=100*1.8194

= $181.94

Correct Option =c. $181.9

2)

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period =0.8%
n=number of period =30*12 =360
= $5800[ 1-(1+0.008)^-360 /0.008]
= $5800[ 1-(1.008)^-360 /0.008]
= $5800[ (0.9432) ] /0.008
= $6,83,833.26

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