(d) Suppose Mary purchased a pension scheme with a principal of $3,500,000 and the annual interest...
(d) Suppose Mary purchased a pension scheme with a principal of $3,500,000 and the annual interest rate is 8%. How much will she receive per quarter, forever? (3 marks)
(e) Suppose Mary has $50,000 in the bank account earning interest of 2% payable annually. As she plans to go travel for a month in Europe, she can save an additional $3,500 per month. How much will she accumulate 6 years from now? (correct to 2 decimal places)
Homework Answers
(d) Suppose Mary purchased a pension scheme with a principal of $3,500,000 and the annual interest rate is 8%. How much will she receive per quarter, forever?
Interest rate per quarter = 8%/4 = 2%
The amount received per quarter = Principal x Interest rate per quarter
The amount received per quarter = 3,500,000 * 0.02
The amount received per quarter = $70,000
(e) Suppose Mary has $50,000 in the bank account earning interest of 2% payable annually. As she plans to go travel for a month in Europe, she can save an additional $3,500 per month. How much will she accumulate 6 years from now?
Monthly rate = 2%/12 = 0.001666666667
The future value of the annuity:
n = 6 * 12 = 72
The future value of $50,000
FV = PV * (1 + r)^n
FV = 50,000 * (1 + 0.02)^6
FV = $56,308.1209632
Total accumulated amount in 6 years = 267,506.888616499 + 56,308.1209632
Total accumulated amount in 6 years = $323,815.00958
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