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.

Solutions

Expert Solution

Answer = $ 114,027.36

Note:

Year	Cash Flow	Discounting Factor	Present Value (Cash Flow * Discounting factor)
1	10550	0.952380952	10047.61905
2	10550	0.907029478	9569.160998
3	10550	0.863837599	9113.486665
4	10550	0.822702475	8679.511109
5	10550	0.783526166	8266.201056
6	10550	0.746215397	7872.572435
7	10550	0.71068133	7497.688033
8	10550	0.676839362	7140.655269
9	10550	0.644608916	6800.624066
10	10550	0.613913254	6476.784825
11	10550	0.584679289	6168.3665
12	10550	0.556837418	5874.634762
13	13950	0.257514256	3592.323864
14	13950	0.231994825	3236.327806
15	13950	0.209004347	2915.610636
16	13950	0.188292204	2626.676248
17	13950	0.169632616	2366.374999
18	13950	0.152822177	2131.869368
19	13950	0.137677637	1920.603034
20	13950	0.124033907	1730.273004
		Total =	1,14,027.36

jeff jeffy answered 1 year ago

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