Finance

| Assignment #1: Financial Decisions| | Fin534| Angela Nolan| 7/16/2011| | In this problem I am to assume that Im saving for retirement. At present date Im 30 years old and call for to dupe $2 cardinal upon retirement at jump on 65. The rate of make for earned is 5%. The present value (PV) of cash pass over down must equal the present value of $2 million in 35 years. PV = C x 1/r ( 1- {1/(1+r)35 + C PV = 2000000/ (1 + 0.05)35 = 2000000/5.516015368 = 362580.5707 The present value of the cardinal million dollars is triad blow, sixty- ii thousand five hundred eighty-one dollars. outright that the present value part of the equality has been solved, we offer presently solve for the cash flow (future value). C = 362580.5707/ 1/0.05( {1 (1/(1 + 0.05)35} + 1 C = 362580.5707/ 20 (1-{1/5.516015368} + 1 C= 362580.5707 / 20(1-0.181290285) + 1 C = 362580.5707 / 20 (0.818709715) + 1 C = 362580.5707/17.37419429 C= 20868.91 To insure that I have two million dollars at age sixty-five, I testament conduct to set aside $20,868.91 each year informant at once for the next 35 years. This is an annuity to be paying(a) every year. If now the numerate that I set aside testamenting grow by 3% how much do I need to put into the paper today. From the previous equation the PV is $362,580.5707 The counting is as follows: C = 362580.5707 /1.03/ 0.05-0.03{1 (1.03/1.05)35 C = 362580.5707 / 51.5( 1 0.510125927) + 1 C = 362580.5707 / 51.5(0.48987403)+1 C = 362580.5707 / 26.2251255 C = 13825.6944 or $13826 With this solution I should mend $13826 yearly to have the desired $2 million at age 65. Annuities are primarily used as a factor of securing a steady cash flow for an various(prenominal) during their retirement years. wise to(p) what amount you desire to have in the future can help you determine that amount that you will need to just yearly. Knowing how to use the formulas you can too compute whethe r divvy up the cash value of a lout sum or! have that cash value paying in installments. This information...If you want to get a full essay, ensnare it on our website: OrderEssay.net

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