IRA Investment
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1. You plan to invest $3,000 per year in an IRA for the next 30 years. You would like to know the effect of investing this money into three different mutual funds. The investments are all made at the beginning of each year. Investment (1) into Certificates of Deposits averages 5 percent per annum. Investment (2) into a Blue Chip Mutual Fund averages 9 percent per annum. Investment (3) into an S & P 500 Index Fund averages 15 percent Annum.The effects of investing $90,000 in $3,000 annual increments at the beginning of each year for 30 years would be as follows: 2. You have won the sweepstakes and are offered the option of receiving either $50,000,000 today or $12,000,000 at the end of each of the five years. Ignoring taxes and assuming a discount rate of 12 percent which option would you prefer? Please show your work. The choice would be to take a $50,000,000 lump sum payment today, as the $60,000,000 paid in five annual increments would have a net present value today of only $43,260,000 (as illustrated below).
. . .
at is the present value of $1500 to be received at the end of 10 years if our discount rate is 8 percent?
$694.50
11. If you provide for a college education we are going to deposit $500 at the end of each year for the next fiver years at wells Fargo bank, where it will earn 6 percent interest, how much will we have at the end of five years?
Year
Amount
FVIF 6%
FV 6%
1
$500
1.262
$631
2
$500
1.191
$596
3
$500
1.124
$562
4
$500
1.060
$530
5
$500
1.000
$500
Total FV
$2,819
12. What is the present value of an investment that yields $500 to be received in 5 years and $1,000 to be received in 10 years if the discount rate is 4 percent?
$1,087
Year
Amount
PVIF 4%
PV 4%
5
500
0.822
$411
10
1000
0.676
$676
NPV
$1,087
13. How much must be deposited in an 8 percent savings account at the end of each year to accumulate $5,000 at the end of ten years?
$345.17
Year
Payment
FVIF 8%
FV 8%
1
345.17
1.999
$689.99
2
345.17
1.851
$638.91
3
345.17
1.714
$591.62
4
345.17
1.587
$547.78
5
345.17
1.469
$507.05
6
345.17
1.360
$469.43
7
345.17
1.26
. . .
Some common words found in the essay are:
Payment FVIF, Accrual Amount, King Inc, Handling Expense, S&P Fund, Systems Inc, Expectation Factors, PV Installment, Revenue Bond, Acceptance Returns, 12000000 0, discount rate, branch office, 20 days, net income, days amount bill, total cost, annual payments, savings account, additional net, compounded annually, additional net income, amount bill paid, received 10 discount, 10 discount rate,
Approximate Word count = 1464
Approximate Pages = 6 (250 words per page)
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