1/ You just started working and you planned to save $5,000 every year in your retirement account. How much money will you have in your retirement account once you retire in 40 years? Your retirement account pays 4% interest rate per year.

2/ You just retired with $1,000,000 savings. You’d like to receive your savings as an annuity for 20 years. If the interest rate on your account is 5%, how much do you receive every year?

3/ The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $40 in interest each year (at the end of the year) but never return the principal. The current discount rate for Canadian government bonds is 7.5%. What should this bond sell for in the market?

Answer rating: 100% (QA)

1 Using the formula for future value of an annuity we have FV Pmt x 1 rn 1 r where Pmt 5000 annual s... View the full answer