Exercises in Compound Interest Study Appendix 9. Then answer the following questions: 1. At age 60, you find that your employer is moving to another location. You receive termination pay of $100,000. You have some savings and wonder whether to retire now.

a. If you invest the $100,000 now at 8%, compounded annually, how much money can you with- draw from your account each year so at the end of 5 years there will be a zero balance?

b. If you invest it at 10%? 2. At 16%, compounded annually, which of the following plans is more desirable in terms of present value? Show computations to support your answer.

Annual Cash Inflows Year Mining $100,000 12345 80,000 Farming $ 20,000 40,000 60,000 60,000 40,000 80,000 20,000 $300,000 100,000 $300,000