Question: You realize that the plan in Problem 41 has a
You realize that the plan in Problem 41 has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 3% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.)
Answer to relevant QuestionsYou are 35 years old, and decide to save $5000 each year (with the first deposit one year from now), in an account paying 8% interest per year. You will make your last deposit 30 years from now when you retire at age 65. ...A local bank is running the following advertisement in the newspaper: “For just $1000 we will pay you $100 forever!” The fine print in the ad says that for a $1000 deposit, the bank will pay $100 every year in ...You can earn $50 in interest on a $1000 deposit for eight months. If the EAR is the same regardless of the length of the investment, determine how much interest you will earn on a $1000 deposit fora. 6 months. b. 1 year. c. ...Suppose the term structure of risk-free interest rates is as shown below:a. Calculate the present value of an investment that pays $1000 in two years and $2000 in five years for certain.b. Calculate the present value of ...Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74.a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)?b. If the bond’s ...
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