Question

Exercise 6-15 John Bogut just received a signing bonus of $1,019,200. His plan is to invest this payment in a fund that will earn 10 % , compounded annually. Click here to view factor tables If Bogut plans to establish the AB Foundation once the fund grows to $2,403,223, how many years until he can establish the foundation? years LINK TO TEXT LINK TO TEXT Instead of investing the entire $1,019,200, Bogut invests $315,300 today and plans to make 9 equal annual investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the $2,403,223 foundation at the end of 9 years? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Payments $ LINK TO TEXT EINK TO TEXT

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Answer 1

Answer to Q#6-15 (First question in the list): A) Annual Interest Rate Annual amount of deposit, PMT Initial balance in account, PV Balance in account at the end, FV Interest compounding type, TYPE # of Years in which it will reach target 10% $0 $1,019,200 $2,403,223 [Four fold of initial balance = $1 x 4 times = $4] 0 = 0 if compounded at the end of each year; 1 if compounded at the beginning of each year. 9 years [Ref: NOTE] NOTE: # of Years in which it will reach target is calculated using EXCEL FUNCTION NPER(rate,pmt,pv,fv,type) where rate = 10%; pmt = 0; pv = 1019200; fv = -2403223; type=0; Here, pv is positive as it denotes cash outflow; fv is negative as it denotes cash inflow; type=0 as compounds at the end of each year only. F G 10% $0 1 Annual Interest Rate 2 Annual amount of deposit, PMT 3 Initial balance in account, PV 4 Balance in account at the end, FV 5 Interest compounding type, TYPE 6 # of Years in which it will reach target $1,019,200 $2,403,223 0 = 0 if compounded at the end of each year; 1 if compounded at the beginning of each year. =NPER(B1,B2,-B3,B4,B5) [Ref: NOTE]

B) 10% Annual Interest rate, RATE # of annual deposits, NPER Initial investment, PV Target maturity value at the end, FV Annual installment type, TYPE Equal annual year-end deposits required $315,300 $2,403,223 0 = 0 if deposits made at the end of each year; 1 if deposits made at the beginning of each year $122,227 [Ref: NOTE] NOTE: Equal annual year-end deposits required is calculated using EXCEL FUNCTION PMT(rate,nper,pv,fv,type) where rate=10%; nper=9; pv=315300; fv=-2403223; type=0; Here, fv is negative as it denotes cash inflow; type=0 as deposits are made at the end of each year only. B 10% А 1 Annual Interest rate, RATE 2 # of annual deposits, NPER 3 Initial investment, PV 4 Target maturity value at the end, FV 5 Annual installment type, TYPE 6 Equal annual year-end deposits required 7 $315,300 $2,403,223 0 = 0 if deposits made at the end of each year; 1 if deposits made at the beginning of each year =PMT(B1,B2,B3,-B4,B5) [Ref: NOTE]