Question

In: Finance

Your grandparents have promised you $39,000 as a graduation gift in two years. If the rate...

Your grandparents have promised you $39,000 as a graduation gift in two years. If the rate of return on investing the gift is 10 percent, and you would ideally like to have $174,000 as an ending balance. How long will you wait from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

Future Value required (FV) = $174,000

Value after 2 years when gift is recevied (PV) = $39000

Interest rate (i) = 10%

Number of years required for $39000 to become $174000 at 10% rate (n) = ?

FV = PV x (1+i)n

174000 = 39000 x (1.10)n

4.461538 = 1.10n

Therefore n = 15.69 years

Therefore it will take 15.69 years for $39000 to become $174000.

I will receive $39000 after 2 years.

Therefore I have to wait 17.69 years for $174000


Related Solutions

You are promised to double your investment in 4 years. What rate of interest per year...
You are promised to double your investment in 4 years. What rate of interest per year are you being promised? Group of answer choices 18.92% Need more information 15.78% 24.75%
Yumi's grandparents presented her with a gift of $21,000 when she was 12 years old to...
Yumi's grandparents presented her with a gift of $21,000 when she was 12 years old to be used for her college education. Over the next 5 years, until she turned 17, Yumi's parents had invested her money in a tax-free account that had yielded interest at the rate of 2.5%/year compounded monthly. Upon turning 17, Yumi now plans to withdraw her funds in equal annual installments over the next 4 years, starting at age 18. If the college fund is...
(2) Your wealthy Aunt offers you a graduation gift. She will give you a $10,000 lump...
(2) Your wealthy Aunt offers you a graduation gift. She will give you a $10,000 lump sum payment or 1,100/year for the next 10 years. This is essentially a risk free gift from your standpoint. The risk free rate currently sites at 2.5%. Which will you take? Why? Please use the financial principles from the chapter to make this decision. show your work.
Assume that you inherited $100,000 from your grandparents, today. You have exactly 20 years to retire...
Assume that you inherited $100,000 from your grandparents, today. You have exactly 20 years to retire and you decided to put the entire amount into 20 years, 4% annual interest annuity. A) Assuming you did not deposit any additional amount into this account, compute your account balance by the time you retire, using the annuity calculator. Then, compute the same using a scientific calculator (not a financial one) using the appropriate formulas from the textbook and show your calculations. (Make...
Suppose a relative has promised to give you $1,000 as a wedding gift the day you...
Suppose a relative has promised to give you $1,000 as a wedding gift the day you get engaged. Assuming a constant interest rate of 5%, consider the present and future values of this gift, depending on when you become engaged. Complete the first row of the table by determining the value of the gift in one and two years if you become engaged today. Date Received Present Value Value in One Year Value in Two Years (Dollars) (Dollars) (Dollars) Today...
You have $39,000 in an account earning an interest rate of 4%. What are the equal...
You have $39,000 in an account earning an interest rate of 4%. What are the equal beginning-of-month withdrawals you can make from this account such that it is completely depleted with the last withdrawal at the beginning of the last month in 22 years? Round to the nearest cent. ​[Hint: The amount in the account today is the PV of an annuity due where the withdrawals are the annuity cash flows. There will be a total of 22 x 12...
You graduated college and as a graduation gift to yourself you want to buy a nice...
You graduated college and as a graduation gift to yourself you want to buy a nice computer for $1600. You have used up all your savings by this point and will need to charge it to your credit card which has an annual interest rate of 18.99%. Assume you make no other purchases with your credit card. (3 points each) a. You decided to make the minimum payment. Your bank calculates the minimum payment as 2% of your balance or...
You expect to receive $19,000 at graduation in two years. You plan on investing it at...
You expect to receive $19,000 at graduation in two years. You plan on investing it at 11 percent until you have $92,000. How long will you wait from now? a. 15.11 years b. 13.11 years c. 19.17 years/ d. 17.11 years e. 18.83 years
You expect to receive $15,000 at graduation in two years. You plan on investing it at...
You expect to receive $15,000 at graduation in two years. You plan on investing it at 12 percent until you have $104,000. How long will you wait from now?
A. You expect to receive $28,000 at graduation in two years. You plan on investing it...
A. You expect to receive $28,000 at graduation in two years. You plan on investing it at 9.75 percent until you have $163,000. How long will you wait from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Period __________ years B. An investment offers to quadruple your money in 36 months (don’t believe it). What rate per year are you being offered? (Do not round intermediate calculations and enter your answer as...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT