Ch. 6 Homework

# Ch. 6 Homework - Kevin Wallace Ch.6 Homework P.184#53 A...

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Kevin Wallace Ch.6 Homework P.184 #53 A. PVA=\$10,000 [[1-(1/1.11) ^5]=\$36,958.97 PVA=\$10,000 + 10,000 ([1-(1/1.11)4]/0.11)=\$41,024.46 B. FV= PV (1+r)t =36,958.97 (1+.011)^5=62,278.01 =41,024.46 (1+0.11)^5=69,128.60 C. Highest present value is PV of annuity due. Highest future value is FV of annuity due. Yes because the value on money is greater if the sum you get today in place of tomorrow, and in annuity due method we get back the sum of the money one year earlier. P.185 #57 Pre-retirement APR EAR=0.10=[1+(APR/12)]^12-1 APR=12[(1.10)^1/12-1]=9.57% Post-retirement APR EAR=0.07=[1+)APR/12]^12-1 APR=12[(1.07)1/12-1]=6.79% PPVA=\$20,000{1-[1/(1+0.0679/12)^12 (25) ]}/(0.0679/12)=\$2,885,496 PV=\$900,000/[1+(0.0679/12)]^300=\$165,824 At retirement he needs \$2,885,496+165,824.26=\$3,051,320.71 He will need to save \$2,500 per month for the next 10 years to be able to purchase the cabin FVA=\$2,500[{[1+(0.0957/12]^12 (10)- 1}/(0.0957/12)]=\$499,659 After purchasing cabin he will have this amount left:

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Ch. 6 Homework - Kevin Wallace Ch.6 Homework P.184#53 A...

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