Computational Problems
2 points each
5/12/2009
NAME:
KEY
51
You invest $10,000 today into a retirement account. You expect to earn 11 percent, compounded monthly,
on your money for the next 25 years. After that, you want to be more conservative, so only expect to earn
7 percent, compounded semi-annually. How much money will you have in your account when you retire
40 years from now, assuming that this is the only deposit you make into the account?
a.
$397,062
Years 1-25
b.
$433,590
Calculator
EXCEL
c.
$441,387
300
N
300
d.
$443,908
0.92
I/Y
0.01
e.
$483,928
-10000
PV
-10000
0
PMT
0
FV
$154,478.89
Solution
Years 26-40
Calculator
EXCEL
30
N
30
3.5
I/Y
0.04
($154,478.89)
PV
($154,478.89)
0
PMT
0
FV
$433,590.36
Solution
$433,590.36
52
Ten years ago, Frederico deposited $2,500 into an account,
Five years ago, he added an additional
$2,500 to his account… He earned 8 percent , compounded quarterly, for the first five years
and 12 percent, compounded annually, for the last five years.
How much money does Frederico
have in his account today?
a.
$9,018.68
First 5 Years
b.
$10,952.72
Calculator
EXCEL
c.
$11,192.81
N
20
d.
$11,408.17
I/Y
0.02
e.
$12,997.43
PV
($2,500.00)
PMT
0
FV
$3,714.87
Solution
Second 5 Years
Calculator
EXCEL
N
5
I/Y
0.12
PV
($6,214.87)
PMT
0
FV
$10,952.72
Solution
$10,952.72