Question

Bridgette wants to retire 36 years from now. She decides to start saving $400 each month into a Roth IRA starting at the end of this month. If the IRA is expected to earn an average return of 9% annually, how much will she have in the account at the end of 36 years? Round to two decimal places 5. 6. Durran has recently acquired a rare art piece that he plans to put on display in his private collection. He estimates that revenues generated from donations and admissions tickets to see the new exhibit will be $2,000 per month for the next eight years. If he requires a rate of return of 12%, how much are the expected cash flows worth for him today? Round to two decimal places. 7. Adelai Inc. loans you $32,000 for five years to buy a car. The loan must be repaid in 60 equal monthly payments. The annual interest rate on the loan is 8 percent. What is your monthly payment? Round to two decimal places. 8. Your company has received a $50,000 loan from an industrial finance company. The annual payments are $6,202.70. If the company is paying 9 percent interest per year, how many loan payments must the company make? Round to the nearest number of periods. 9. You are ready to retire. A glance at your 401(k) statement indicates that you have $2,750,000. If the funds remain in an account earning 4.5% annually, how much could you withdraw at the end of each year for the next 30 years? Round to two decimal places. 10. If you wish to accumulate $280,000 in the child's college fund after 18 years, and can invest at a 7.5% annual rate, how much must you invest at the end of each year if the first deposit is made at the end of the first year? Round to two decimal places.

Answer 1

Calculate the future value as follows Future value a Payment ×| (1 +Rate)num era periods-1 Rate (l+Rate) 990)3612 12 $400| | 1+-。 990 12 - $400x 3230.25173501 = $1,292,100.69 Therefore, the future value of the payment is $1,292,100.69 Note Rate is divided by 12 because compounding is done monthly. Number of periods is multiplied by 12 because compounding is done monthly.