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Finance 530
Quiz
1 time value
of money and bonds
Print Name:
Answer the
following questions. The quiz
is
worth 30
points. Show
your
calculations to receive
full credit.
1.
Professor Abbondante tumed 35 today, and he is planning
to save $5,000
per year for
retirement, with the first deposit to be made one year from
today. He
will
invest in a mutual
fund that will provide a retum of 8Yo per year. He plans to retire 30 years from today, when
he tums 65, and he expects to
live for 25 years after retirement, to
age
90.
Under these
assumptions, how much can he spend in each year after he retires?
His first withdrawal will
be made at the end of his first retirement year. Hint: this
will require 2 calculations.
PV
PMT
FV
0
5,000
566.416
PV
PMT
FV
566,416
53.061 0
2.
You are considering investing
in
a bank account that pays a nominal annual rate
of
6Yo, compounded
monthly.
If
you invest $5,000 at the end
of
each month, how many
years
will it
take for your account to reach $200,000?
NI

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