Question

In: Finance

For her daughter's university education, Carla Hackl has invested an inheritance in a fund paying 9.2%...

For her daughter's university education, Carla Hackl has invested an inheritance in a fund paying 9.2% compounded quarterly. If ordinary annuity payments of $4750.00 per month are to be made out of the fund for 5 years and the annuity begins 9.75 years from now, how much was the inheritance?

Solutions

Expert Solution

Solution

Ordinary Annuity

When the quarterly deposits are made at end of the every quarter then it is knowing as ordinary annuity

We can use the formula for finding the future value as below

  1. A = p x [ ( 1 + (r/n) )nt-1 ] / ( r/n )

Here A = future value = $?

        p = Cash flow per period = $4750

        r = rate of interest = 9.2% = 9.2/100 = 0.092

                n = compounding frequency is quarterly so n= 4

       t = Number of years = 9.75 years = 9.75 x 4 = 39 quarters

A = 4750 x [ ( 1 + (0.092/4 ))4(9.75) – 1 ] / (0.092/1)]

A = 4750 x [ ( 1 + (0.023 ))(39) – 1 ] / (0.023)]

A = 4750 x [ ( 1.023 ))(39) – 1 ] / (0.023)]

A = 4750 x [ 2.427446767 – 1 ] / (0.023)]

A = 4750 x [ 1.427446767 ] / (0.023)]

A = 4750 x [ 62.0629]

A = 294798.79


Related Solutions

Julie is going to establish a University Fund for her daughter Jade, who has just been...
Julie is going to establish a University Fund for her daughter Jade, who has just been born. She plans to make the first deposit of $5,000 on Jade’s fourth birthday and make another 8 annual deposits of this amount. After this, annual deposits of $10,000 will be made until Jade’s 18th birthday. Given the long term nature of the investment, Julie anticipates an 8% pa return. The money is the transferred to an account for Jade and she will then...
Linda Roy received a $205,000 inheritance after taxes from her parents. She invested it at 6.5%...
Linda Roy received a $205,000 inheritance after taxes from her parents. She invested it at 6.5% interest compounded quarterly for 8 years. A year later, she sold one of her rental properties for $215,000 and invested that money at 5.5% compounded semiannually for 7 years. Both of the investments have matured. She is hoping to have at least $505,000 in 12 years compounded annually at 4.5% interest so she can move to Hawaii.
Linda Roy received a $205,000 inheritance after taxes from her parents. She invested it at 6.5%...
Linda Roy received a $205,000 inheritance after taxes from her parents. She invested it at 6.5% interest compounded quarterly for 8 years. A year later, she sold one of her rental properties for $215,000 and invested that money at 5.5% compounded semiannually for 7 years. Both of the investments have matured. She is hoping to have at least $505,000 in 12 years compounded annually at 4.5% interest so she can move to Hawaii. Future Value of Inheritance Investment: $ Future...
Helen invested the profit of her business in an investment fund that was earning 3.25% compounded...
Helen invested the profit of her business in an investment fund that was earning 3.25% compounded monthly. In 3 years, she began withdrawing $3,500 from this fund at the end of every 6 months. If the money in the fund lasted for the next 4 years, how much money did she initially invest in the fund? (P.s the answers posted before are wrong)
Amanda invested the profit of her business in an investment fund that was earning 2.50% compounded...
Amanda invested the profit of her business in an investment fund that was earning 2.50% compounded monthly. In 5 years, she began withdrawing $2,000 from this fund at the end of every 6 months. If the money in the fund lasted for the next 4 years, how much money did she initially invest in the fund?
Chlo is planning for her 15 year-old daughter’s university education.  She estimates that 1 year of university...
Chlo is planning for her 15 year-old daughter’s university education.  She estimates that 1 year of university would cost $15,000 in today’s dollars, but will rise with the rate of inflation of 2% year over year.  How much would Chlo need to have accumulated by the time her daughter starts university at the age of 19 provided she attends university for 3 years and will receive funds at the beginning of each year?  Assume an investment rate of 3.6%, compounded monthly
QUESTION 3 Harper has $200,000 in her superannuation fund, and her fund is in the accumulations...
QUESTION 3 Harper has $200,000 in her superannuation fund, and her fund is in the accumulations phase. Harper’s employer contributes $10,000 during the year. The fund has distributed Harper’s $200,000 into various investments and makes a gain of $25,000 for the current financial year. This gain consists of $15,000 interest and $10,000 in capital gains from the sale of assets that had been held for more than 12 months. What is the tax payable for the superannuation fund for the...
Lucy set up a savings fund for her son's education so that she would be able...
Lucy set up a savings fund for her son's education so that she would be able to withdraw $1,775 at the beginning of every month for the next 5 years. The fund earns 4.35% compounded quarterly. a. What amount should she deposit today to allow for the $1,775 periodic withdrawals? $77,923.75 $95,595.71 $95,940.99 $78,771.17 b. How much interest would she earn in this investment? $95,940.99 $10,559.01 $106,500.00 $10,904.29
Your uncle has $2,000 invested in a mutual fund with a beta of 1.2 and a...
Your uncle has $2,000 invested in a mutual fund with a beta of 1.2 and a standard deviation of 12%. His financial advisor suggested that he should move his money into an Index fund that tracks the Russell 2000, which has a beta of 1.9 and a standard deviation of 18%.   How could your uncle invest his money in some combination of that Index fund and risk-free T-bills that would increase his expected return without increasing his standard deviation?   Assume...
Your uncle has $2,000 invested in a mutual fund with a beta of 1.2 and a...
Your uncle has $2,000 invested in a mutual fund with a beta of 1.2 and a standard deviation of 12%. His financial adviser suggested that he should move his money into an Index fund that tracks the Russell 2000, which has a beta of 1.9 and a standard deviation of 18%. How could your uncle invest his money in some combination of that Index fund and risk-free T-bills that would increase his expected return without increasing his standard deviation? Assume...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT