Quantitative Problem 1: You plan to deposit $2,300 per year for 5 years into a money...

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Quantitative Problem 1: You plan to deposit $2,300 per year for 5 years into a money market account with an annual return of

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Answer 1

Answer #1

1.Quatitiative Problem 1

a. Information provided:

Annul deposit= $2,300

Time= 5 years

Interest rate= 2%

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

PMT= 2,300

N= 5

I/Y= 10

Press the CPT key and PV to compute the present value.

The value obtained is 8,718.81.

Therefore, $8,718.81 will be in the account after 5 years.

b. Information provided:

Annul deposit= $2,300

Time= 5 years

Interest rate= 2%

The question is concerning finding the present value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

Enter the below in a financial calculator in BGN mode to compute the present value:

PMT= 2,300

N= 5

I/Y= 10

Press the CPT key and PV to compute the present value.

The value obtained is 9,590.6905.

Therefore, $9,590.69 will be in the account after 5 years.

2. Quantitative Problem 1

a. Information provided:

Yearly withdrawal= $100,000

Time= 30 years

Interest rate= 10%

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

PMT= 100,000

N= 30

I/Y= 10

Press the CPT key and PV to compute the present value.

The value obtained is 942,691.4467.

Therefore, $8942,691.45 will be in the retirement account the day I retire.

b. Information provided:

Yearly withdrawal= $100,000

Time= 30 years

Interest rate= 10%

The question is concerning finding the present value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

Enter the below in a financial calculator in BGN mode to compute the present value:

PMT= 100,000

N= 30

I/Y= 10

Press the CPT key and PV to compute the present value.

The value obtained is 1,036,960.591.

Therefore, $1,036,960.59 will be in the account the day I retire.

In case of any query, kindly comment on the solution

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