# Bankrate.com reported on a shocking statistic: only 54% of workers participate in their company's retirement plan. This

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## Question:

2. If vou saved an average of $2.900 each year from vour income tax return, $1.050 for not buving vendor conce

and $2.400 (saving $200 each pavcheck). how much would you have in vour retirement account if you were able to invest this annual savings at the end of each year for 30 years at 5% interest compounded annually?

3. Alice Longtree has decided to invest $400 quarterly for 4 vears in an ordinary annuity at 8%. As her financial

adviser. calculate Tor Alice me local cash value or the annuity at the end or year 4.

4. At the beginning of each period for 10 years, Merl Agnes invests 500 semiannually at 6%. What is the cash

value of this annuity due at the end of year 10?

5. Jeff Associates needs to repay $30,000. The company plans to set up a sinking fund that will repay the loan at the end of 8 years. Assume a 12% interest rate compounded semiannually. What must Jeft pay into the fund each period of time? check answer with table 13.1.

6. On Joe Martin's graduation from college, Joe's uncle promised him a gift of $12,000 in cash or $900 every

quarter for the next 4 years after graduation. If money could. be invested at 8% compound guarteriy which offer is better for Joe?

7. You are earning an average of $46,500 and will retire in 10 years. If you put 20% of your gross average income in an ordinary annuity compounded at 7% annually, what will be the value of the annuity when you retire?

8. A local Dunkin' Donuts franchise must buy a new piece of equipment in 5 years that will cost $88,000. The

company is setting up a sinking fund to finance the purchase. What will the quarterly deposit be if the fund earns 8% interest?

9. Mike Macaro is selling a piece of land. Two offers are on the table. Morton Company offered a $40,000 down payment and $35,000 a year for the next 5 years. Flynn Company offered $25,000 down and $38,000 a year for the next 5 years. If money can be invested at 8% compounded annually, which offer is better for Mike?

10. Al Vincent has decided to retire to Arizona in 10 years. What amount should Al invest today so that he will

be ble to withdraw $28,000 at the end of each year for 15 years after he retires? Assume he can invest the money at 8% interest compounded annually.

11. Victor French made deposits of $5,000 at the end of each quarter to Book Bank, which pays 8% interest compounded quarterly. After 3 years, Victor made no more deposits. What will be the balance in the account 2 years after the last deposit?

12. Janet Woo decided to retire to Florida in 6 years. What amount should Janet invest today so she can withdraw $50,000 at the end of each year for 20 years after she retires? Assume Janet can invest money at 6% compounded annually.

13. Researching retirement savings online, you found an article from NewRetirement.com with recommendations from the financial guru, Dave Ramsey, and others. Dave Ramsey recommends investing 15% of every paycheck into a Roth IRA and pre-tax retirement accounts. If your household earns $75,000 annually and you adhere to Ramsey's recommendation. how much will your retirement account be worth if your 15% ordinary annuity earns 9% annually for 30 years? Round to the nearest dollar.

**Related Book For**

## Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill