This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: each year, forever. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year annual payment, ordinary annuity instead of a perpetuity? A) $13,922 B) $10,342 C) $17,157 D) $12,273 E) $11,931 Points Earned: 5.0/5.0 Correct Answer(s): D 3. Bill and Bob are both 25 years old today. Each wants to begin saving for his retirement. Both plan on contributing a fixed amount each year into brokerage accounts that have annual returns of 12%. Both plan on retiring at age 65, 40 years from today, and both want to have $3 million saved by age 65. The only difference is that Bill wants to begin saving today, whereas Bob wants to begin saving one year from today. In other words, Bill plans to make 41 total contributions (t = 0, 1, 2, . .. 40), while Bob plans to make 40 total contributions (t = 1, 2, . .. 40). How much more than Bill will Bob need to save each year in order to accumulate the same amount as Bill does by age 65? A) $473.85 B) $414.48 C) $796.77 D) $423.09 E) $892.39 Points Earned: 5.0/5.0 Correct Answer(s): D...
View Full Document
- Spring '09
- Finance, Correct Answer, Points Earned