fin3331 061902 tvm misc hawaii (1)

fin3331 061902 tvm misc hawaii (1) - TVM Odds and ends...

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TVM Odds and ends Quiz: Assume that you have undeveloped land in Hawaii that produces an income of 12,500 per year, and assume that the appropriate rate of return on such land is 8 percent. Using the Jesse James Method: (1) Determine the value of the land itself. (Hint: a perpetuity) (2) Determine the present value of all payments beyond the 100th year. (3) Determine the value of a 100 year lease. (A 100 year annuity) (1) Assume that you will retire at age 65 and that you will live to age 80. You wish to provide supplemental retirement income of 18,000 per year before taxes for your retirement. Assume that you are 22 years old. How much must you set aside per year for your retirement, assuming that you can earn 17 percent on your money? Part 1: Lump sum needed at retirement. N=80 – 65 =15, PMT = 18,000, FV=0, i = 17. CPT PV= – 95,835.37 Part 2: FV= 95,835.37, i= 17, PV=0, n=65 – 22 = 43, CPT PMT= – 19.07. Question came up in class: What if there is 2 percent inflation?
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This note was uploaded on 02/22/2011 for the course FIN 3331 taught by Professor Nowacki during the Spring '09 term at Troy.

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fin3331 061902 tvm misc hawaii (1) - TVM Odds and ends...

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