1.?Sarah Wiggum would like to make a single investment and have ?$2.2 million at
ID: 1172530 • Letter: 1
Question
1.?Sarah Wiggum would like to make a single investment and have ?$2.2 million at the time of her retirement in 32 years. She has found a mutual fund that will earn 5 percent annually. How much will Sarah have to invest? today? If Sarah earned an annual return of 16 ?percent, how soon could she then? retire???
a.??If Sarah can earn 5 percent annually for the next 32 ?years, the amount of money she will have to invest today is ?$______. ?(Round to the nearest? cent.)
2. How many years will it take for $500 to grow to $999.97 if? it's invested at 8 percent compounded? annually?
The number of years it will take for $500 to grow to $999.97 at 8 percent compounded annually is _____years. ? (Round to one decimal? place.)
3. Ronen Consulting has just realized an accounting error that has resulted in an unfunded liability of ?$390,000 due in 29 years. In other? words, they will need $390,000
in 29 years. Toni? Flanders, the? company's CEO, is scrambling to discount the liability to the present to assist in valuing the? firm's stock. If the appropriate discount rate is
8 ?percent, what is the present value of the? liability?
If the appropriate discount rate is 8 ?percent, the present value of the ?$390,000 liability due in 29 years is ?$_____.? (Round to the nearest? cent.)
Explanation / Answer
1.
a.
If Sarah can earn 5 percent annually for the next 32 ?years, the amount of money she will have to invest today is
=(2.2*1000000)/(1+5%)^32
=461705.57 or 0.46 million
b.
If Sarah can earn 16 percent annually for the next 32 ?years, the amount of money she will have to invest today is
=(2.2*1000000)/(1+16%)^32
=19044.39 or 0.02 million
the above is answer..
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