Chapter 2

Financial Planning Exercise 8

Calculating present and future values

Usefuture or present valuetechniques to solve the following problems.

1. Starting with $8,000, how much will you have in 16 years if you can earn 12 percent on your money? Round the answer to the nearest cent. Round FV-factor to three decimal places.
2. Calculate your answer based on the FV-factor.
3. $
4. Calculate your answer based on the financial calculator.
5. $
6. If you can earn only 9 percent? Round the answer to the nearest cent. Round FV-factor to three decimal places.
7. Calculate your answer based on the FV-factor.
8. $
9. Calculate your answer based on the financial calculator.
10. $
11. If you inherited $95,000 today and invested all of it in a security that paid a 13 percent rate of return, how much would you have in 30 years? Round the answer to the nearest cent. Round FV-factor to three decimal places.
12. Calculate your answer based on the FV-factor.
13. $
14. Calculate your answer based on the financial calculator.
15. $
16. If the average new home costs $225,000 today, how much will it cost in 6 years if the price increases by 5 percent each year? Round the answer to the nearest cent. Round FV-factor to three decimal places.
17. Calculate your answer based on the FV-factor.
18. $
19. Calculate your answer based on the financial calculator.
20. $
21. You think that in 7 years, it will cost $209,000 to provide your child a 4-year college education. Will you have enough if you take $79,000 today and invest it for the next 7 years at 5 percent? Round the answer to the nearest cent. Round FV-factor and FVA-factors to three decimal places.
22. -Select-YesNoItem 9, you will have approximately $-Select-morelessItem 11than your estimate of $209,000.
23. If you start from scratch, how much will you have to save each year to have $209,000 in 7 years if you can earn a 5 percent rate of return on your investments?
24. Calculate your answer based on the FVA-factor.
25. $
26. Calculate your answer based on the financial calculator.
27. $
28. If you can earn 3 percent, how much will you have to save each year if you want to retire in 30 years with $1.6 millions? Round the answer to the nearest cent. Round FVA-factor to three decimal places.
29. Calculate your answer based on the FVA-factor.
30. $
31. Calculate your answer based on the financial calculator.
32. $
33. You plan to have $1,300,000 in savings and investments when you retire at age 66. Assuming that you earn an average of 7 percent on this portfolio, what is the maximum annual withdrawal you can make over a 30-year period of retirement? Round the answer to the nearest cent. Round PVA-factor to three decimal places.
34. Calculate your answer based on the PVA-factor.
35. $
36. Calculate your answer based on the financial calculator.
37. $