On your 18th birthday you receive a $10,000 present from your late grandfather. You put the...
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On your 18th birthday you receive a $10,000 present from your late grandfather. You put the money into an account paying 8% p.a. (compounded quarterly). i. ii. What is the effective annual interest rate payable on this account? How much will be in the account on your 65th birthday? b. You graduate from University on your 21st birthday, and start a new job on that day. You decide to start saving for your retirement, by depositing $250 each month into an account paying 9% p.a. compounded monthly. Your first deposit is one month after your 21st birthday and your last deposit is on your 65th birthday. How much will be in the account on your 65th birthday? c. You are now 65 years old. You receive a bonus from your employer, which takes your total savings for your retirement to $2.5 million. You deposit this total amount into an account paying 10% p.a. (compounded annually). You expect to live to the age of 90. If you make annual withdrawals from this account over the course of your retirement (with the first withdrawal on your 66th birthday and the last withdrawal on your 89th birthday) how much is the annual cash flow you can afford to withdraw each year? On your 18th birthday you receive a $10,000 present from your late grandfather. You put the money into an account paying 8% p.a. (compounded quarterly). i. ii. What is the effective annual interest rate payable on this account? How much will be in the account on your 65th birthday? b. You graduate from University on your 21st birthday, and start a new job on that day. You decide to start saving for your retirement, by depositing $250 each month into an account paying 9% p.a. compounded monthly. Your first deposit is one month after your 21st birthday and your last deposit is on your 65th birthday. How much will be in the account on your 65th birthday? c. You are now 65 years old. You receive a bonus from your employer, which takes your total savings for your retirement to $2.5 million. You deposit this total amount into an account paying 10% p.a. (compounded annually). You expect to live to the age of 90. If you make annual withdrawals from this account over the course of your retirement (with the first withdrawal on your 66th birthday and the last withdrawal on your 89th birthday) how much is the annual cash flow you can afford to withdraw each year?
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SOLUTION a i The effective annual interest rate EAR payable on an account paying 8 pa compounded quarterly is given by the formula EAR 1 rnn 1 where r ... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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