Fin221TVMDiscSp09

# Fin221TVMDiscSp09 - depositing \$2,000 at the end of each...

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Discussion Group Exercises 1. The Dutch purchased Manhattan Island for \$24 in 1630. What would Manhattan Island be worth today in 2008 assuming compound annual interest of 5%? 2. Explain what would happen to your answer to #1 if a higher interest rate were used? 3. The Morse Family (heirs to the telegraph code fortune) bought the land and built the Pebble Beach resort for \$1 million in 1910. Imagine the Morse Family still owned this property when it was sold to a group that included Clint Eastwood and Donald Trump for \$900 million in 1990. What annual rate of return would have the Morse Family earned on this deal? 4. Lisa Simpson wants to retire at age 65 with \$1,000,000 in her Roth IRA. She plans to achieve this goal by
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Unformatted text preview: depositing \$2,000 at the end of each year starting at age 20 with her last deposit at age 65. What annual rate of return must Lisa earn in order to reach her goal? 5. How much money would Fry have in his bank account in the year 3000 from the \$0.93 deposited in the year 2000 if the 2.25% annual rate was compounded semi-annually? 6. Lisa Simpson will have \$1,000,000 in her Roth IRA when she turns 65. Once Lisa turns 65, she wants to make equal beginning of the month withdrawals from her IRA which has an expected return of 8.4% APR compounded monthly. How large will Lisa’s monthly withdrawals be if she wishes to make these withdrawals for 25 years?...
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