a) You have just turned 25 TODAY! As a birthday present to yourself you plan to deposit $17.40 into a savings account daily unit you turn 65. In addition, each week you will deposit an extra $20. If the interest rate on your savings account is i⁽³⁶⁵⁾ = 3%. Use ANNUITIES to find the value of your investment when you retire at 65.

b) You can earn 5% a year on your investment account. If you require $50,000 annually (paid at the start of every year) to cover your living costs for the year how much money will you need to invest today to cover your remaining lifespan, assuming that you magically manage to live forever! Let's say that after 50 years of living you notice that you have actually been earning 6% per year on the amount you calculated to invest but are only using $50,000 per year, how much will be in the investment account?

c) You take out a loan $50,000 at a rate of i⁽⁴⁾ = 8% to buy a new car. If you make quarterly payments of $2,000 and also deposit $500 a quarter into a savings account earning i⁽⁴⁾ = 4%: How long will it take before there is enough money in the savings account to repay the outstanding balance on the loan?

Answer rating: 100% (QA)

a To find the value of the investment when you retire at 65 we can use the formula for the future value of an annuity FV PMT x 1 in 1 i PV x 1 in wher... View the full answer