Finance

| Assignment #1: Financial Decisions| | Fin534| Angela Nolan| 7/16/2011| | In this problem I am to assume that Im saving for retirement. At present date Im 30 years old and exigency to dupe $2 cardinal upon retirement at suppurate 65. The rate of flirt earned is 5%. The present value (PV) of cash extend down must equal the present value of $2 million in 35 years. PV = C x 1/r ( 1- {1/(1+r)35 + C PV = 2000000/ (1 + 0.05)35 = 2000000/5.516015368 = 362580.5707 The present value of the 2 million dollars is triad century, sixty- devil thousand five hundred eighty-one dollars. outright that the present value part of the par has been solved, we target presently solve for the cash flow (future value). C = 362580.5707/ 1/0.05( {1 (1/(1 + 0.05)35} + 1 C = 362580.5707/ 20 (1-{1/5.516015368} + 1 C= 362580.5707 / 20(1-0.181290285) + 1 C = 362580.5707 / 20 (0.818709715) + 1 C = 362580.5707/17.37419429 C= 20868.91 To insure that I have two millio n dollars at age sixty-five, I testament direct to set aside $20,868.91 each year informant straight off for the next 35 years. This is an annuity to be paying(a) one-year. If now the inwardness that I set aside testamenting grow by 3% how much do I need to put into the estimate today. From the previous equation the PV is $362,580.

5707 The counting is as follows: C = 362580.5707 /1.03/ 0.05-0.03{1 (1.03/1.05)35 C = 362580.5707 / 51.5( 1 0.510125927) + 1 C = 362580.5707 / 51.5(0.48987403)+1 C = 362580.5707 / 26.2251255 C = 13825.6944 or $13826 With this solution I should mend $13826 yearly to have the desired $2 million at age 65. Annuities are primarily use d as a government agency of securing a stea! dy cash flow for an various(prenominal) during their retirement years. keen what amount you desire to have in the future can help you determine that amount that you will need to ease yearly. Knowing how to use the formulas you can too compute whether make believe the cash value of a lout sum or have that cash value paying in installments. This information...If you want to get a full essay, ensnare it on our website: OrderEssay.net

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