Quantitative Problem 1: You plan to deposit $2,400 per year for 5 years into a money market account with an annual return of 2%. You plan to make your first deposit one year from today. What amount will be in your account at the end of 5 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ Assume that your deposits will begin today. What amount will be in your account after 5 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ Quantitative Problem 2: You and your wife are making plans for retirement. You plan on living 30 years after you retire and would like to have $75,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 15% annually. What amount do you need in your retirement account the day you retire? Do not round intermediate calculations. Round your answer to the nearest cent. $ Assume that your first withdrawal will be made the day you retire. Under this assumption, what amount do you now need in your retirement account the day you retire? Do not round intermediate calculations. Round your answer to the nearest cent. $\

Respuesta :

Answer:

$12,489.70

$492,448.47

Explanation:

We are to calculate the future value of the 5-year annuity

Future value = Amount x annuity factor

annuity factor =  {[(1+r)^n] - 1} / r

r = interest rate

n = number of years

2400 x[ (1.02)^5 - 1] / 0.02 = $12,489.70

b. We are to calculate the present value of the 30-year annuity

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 1 to 30 =  $75,000

I = 15%

PV = $492,448.47

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute