Naomi Dexter is 20 years old and attends Southwest Tennessee Community College. Her Business English instructor asked
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Question:
1. If Naomi wants to accumulate $1,000,000 by investing money every year into her CD at 3% for 30 years until retirement, how much does she need to deposit each year?
2. If she decides to invest in an annuity that returns at 6% interest, how much will she need to deposit annually to accumulate the $1,000,000?
3. If Naomi invests in a stock portfolio, her returns for 10 or more years will average 10%-12%. Naomi realizes that the stock market has higher returns because it is a more risky investment than a savings account or a CD. She wants her calculations to be conservative, so she decides to use 8% to calculate possible stock market earnings. How much will she need to invest annually to accumulate $1,000,000 in the stock market?
4. After looking at the results of her calculations, Naomi has decided to aim for $500,000 savings by the time she retires. She expects to have a starting salary after college of $25,000 to $35,000 and she has taken into account all of the living expenses that will come out of her salary. What will Naomi's annual deposits need to be to accumulate $500,000 in an investment at 6%?
5. If Naomi decides that she will invest $3,000 per year in a 6% annuity for the first ten years, $6,000 for the next ten years, and $9,000 for the next ten years, how much will she accumulate? Treat each ten-year period as a separate annuity. After the ten years of an annuity, then it will continue to grow at compound interest for the remaining years of the 30 years.
Related Book For
South-Western Federal Taxation 2019 Comprehensive
ISBN: 9781337703017
42th Edition
Authors: David M. Maloney, William A. Raabe, William H. Hoffman, James C. Young
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