F301+PS3_10Fall

F301+PS3_10Fall - F301 - Financial Management 2010 Fall...

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F301 - Financial Management 2010 Fall Problem Set 3 Assignments should be handed in on a separate sheet of paper. If you have multiple sheets, please staple your assignment together. Please show your work in a well-organized, businesslike fashion. It should be neither crowded nor illegibly tiny. Questions should be in numerical order and professionally presented. Make this assignment look like something you could submit to your boss. Full credit will only be given when you show your work. Show formulas and equations or calculator inputs (TVM keys). Each question is worth three points. Total possible points = 42. 1. To prepare for her retirement, an investor plans to make a deposit at the end of each month into a retirement fund. She plans to retire 35 years from now, so she will make 420 deposits. After she retires, she wants to withdraw $48,000 from this fund at the end of each year for the next 20 years. If the fund will earn a rate of return of 6.3% per year (EAR) both before and after retirement, how much must she deposit each month up until retirement in order to meet her objective? That is, what is the amount of the monthly deposit, to fund the annual withdrawals? 2. 3. I loaned my brother-in-law $2,000 for six months. I’m charging him interest at the rate of 1% per month. I have agreed, however, to permit him to make just two payments, one at the end of each quarter. What will be the amount of his quarterly
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F301+PS3_10Fall - F301 - Financial Management 2010 Fall...

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