QUESTION 4

1. You have just received a windfall from an investment you made in a friend's business. She will be paying you $10,000 at the end of this year, $20,000 at the end of next year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year. What is the present value of your windfall?

0.25 points

QUESTION 5

1. You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?

0.25 points

QUESTION 6

1. You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment. If you hope to live for 20 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 20th withdrawal? Assume your savings will continue to earn 10% in retirement.