When you retire, you will combine your money into an account with a 9 percent return. How much can you withdraw each month from your account assuming a 25-year withdrawal period? #5: Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $50,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next year. You have decided that one year from today you will begin depositing 5 percent of your annual salary in an account that will earn 11 percent per year. Your salary will increase at 4 percent per year throughout your career. How much money will you have on the date of your retirement 40 years from today? #6: You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 6.35 percent APR for this 360-month loan. However, you can afford monthly payments of only $1,150, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1,150?
#7: The present value of the following cash flow stream is $6,550 when discounted at 10 percent annually. What is the value of the missing cash flow?Year Cash Flow 1 $1,700 2? 3$2,100 4$2,800 #8: Suppose you are going to receive $10,000 per year for five years. The appropriate interest rate is 11 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due? b. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are an annuity due? c. Which has the highest present value, the ordinary annuity or annuity due? Which has the highest future value? Will this always be true?