An investor plans the following investments for the next 20 years: 12.00 years of $10,075.00 per...

An investor plans the following investments for the next 20 years: 12.00 years of $10,075.00 per year, and 8.00 years of $13,775.00 per year.
She thinks his investments will earn 4.00% a year for the first 12.00 years, and then earn 11.00% per year for the last 8.00 years. How much would the investor have to set aside today if she wants to fund the entire account?

Expert Solution

Year	Cashflows	PVF	Present values
0	0	1	0
1	10075	0.961538	9687.5
2	10075	0.924556	9314.904
3	10075	0.888996	8956.638
4	10075	0.854804	8612.152
5	10075	0.821927	8280.916
6	10075	0.790315	7962.419
7	10075	0.759918	7656.172
8	10075	0.73069	7361.704
9	10075	0.702587	7078.561
10	10075	0.675564	6806.309
11	10075	0.649581	6544.528
12	10075	0.624597	6292.815
13	13775	0.5627	7751.193
14	13775	0.506937	6983.057
15	13775	0.4567	6291.042
16	13775	0.411441	5667.606
17	13775	0.370668	5105.951
18	13775	0.333935	4599.956
19	13775	0.300842	4144.104
20	13775	0.271029	3733.427
Present value of cash outflows			138831

Amount to be kept aside today: 138831

Note: Here PVF is computed by applying 4% for first 12yrs and then 11% afterwards on PVf of 12th year

jeff jeffy answered 1 year ago

An investor plans the following investments for the next 20 years: 12.00 years of $10,200.00 per...

An investor plans the following investments for the next 20 years: 12.00 years of $10,200.00 per year, and 8.00 years of $13,825.00 per year. She thinks his investments will earn 6.00% a year for the first 12.00 years, and then earn 11.00% per year for the last 8.00 years. How much would the investor have to set aside today if she wants to fund the entire account?

An investor plans the following investments for the next 20 years: 12.00 years of $10,550.00 per...

An investor plans the following investments for the next 20 years: 12.00 years of $10,550.00 per year, and 8.00 years of $13,950.00 per year. She thinks his investments will earn 5.00% a year for the first 12.00 years, and then earn 11.00% per year for the last 8.00 years. How much would the investor have to set aside today if she wants to fund the entire account? PLEASE ROUND TO 2 DECIMAL PLACES. THANKS IN ADVANCE.

Derek can deposit $266.00 per month for the next 10 years into an account at Bank A. The first deposit will be made next month. Bank A pays 12.00%

Derek can deposit $266.00 per month for the next 10 years into an account at Bank A. The first deposit will be made next month. Bank A pays 12.00% and compounds interest monthly. Derek can deposit $2,572.00 per year for the next 10 years into an account at Bank B. The first deposit will be made next year. Bank B compounds interest annually. What rate must Bank B pay for Derek to have the same amount in both accounts after...

Graham plans to save $100 each month for the next 20 years so he can purchase...

Graham plans to save $100 each month for the next 20 years so he can purchase a boat. If he earns 10% interest annually with monthly compounding, how much money will he have at the end of 20 years if he starts saving today?

Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment...

Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment for a high-tech slingshot weapon he invented. If a 6 percent rate is applied, should he be willing to sell out his future rights now for $2,000,000?

You have an opportunity to invest in an investment plan for the next 45 years. This plan will offer compound interest of 8 percent per year for the next 20 years and 11 percent per year for the last 25 years.

a) You have an opportunity to invest in an investment plan for the next 45 years. This plan will offer compound interest of 8 percent per year for the next 20 years and 11 percent per year for the last 25 years. If you invest $8,000 in this plan today, how much will you accumulate at the end of the 45 years? Choose the correct answer: $505,539.84 $501,516.38 $506,570.12 $509,092.54 $592,394.59 b) Your rich uncle will give you a...

Assume the following scenario: Bob plans to retire in 20 years from now and wants to...

Assume the following scenario: Bob plans to retire in 20 years from now and wants to have the following stream of CFs after retirement. Monthly payments of $4,000 for 15 years starting right after retirement (The first payment will be at the end of the first month in year 21). He then needs an extra 50000$ with the final payment (final month of year 35). Starting from year 36, he wants the monthly payments to be 6000$ for 10 years...

Next year's earnings are estimated to be $5. the company plans to reinvest 20% of its...

Next year's earnings are estimated to be $5. the company plans to reinvest 20% of its earnings at 15%. If the cost of equity is 9% what is the present value of growth opportunities? A. $9.09 B. $10.10 C. $11.11 D. $12.21

Which of the following investments is clearly preferred to the others for an investor who is...

Which of the following investments is clearly preferred to the others for an investor who is not holding a well-diversified portfolio.. Asset E(r) σ2 A .15 .10 B .18 .12 C .21 .08

A U.S. investor and an Italian investor are considering investments in the U.S. and the Eurozone....

A U.S. investor and an Italian investor are considering investments in the U.S. and the Eurozone. Both investors are quoted the following rates from their banks: Spot exchange rate (e$/€): $1.10/€ One-year forward rate (f$/€): $1.06/€ One-year interest rate on dollars (i$): 3.0% One-year interest rate on euros (i€): 5.0% Does Covered Interest Rate Parity hold given the rates quoted above? Should the U.S. investor make a one-year covered investment in euros or simply invest in dollars?...

Question