Starla has decided to retire in 12 years. She has 44,400available today and want

Question

Starla has decided to retire in 12 years. She has 44,400available today and wants to invest the money to supplemement herpension plan. a. Assume Starla wants to accumulate 100,000 by herretirement date. Will she achieve her goal if she invests44,400 today and earns 7%? b. If Starla invests a total of 44,400 through a seriesof 12 equal annual installments instead of a single amount, wouldStarla accumulate the desired 100,000? The first investmentwould be made one year from today. Show calculations andexplain what you find. c. If the amount accumulated in part A does not equal100,000, approximately how many years would be required, assumingthe same interest rate and equal annual deposits as above. Starla has decided to retire in 12 years. She has 44,400available today and wants to invest the money to supplemement herpension plan. a. Assume Starla wants to accumulate 100,000 by herretirement date. Will she achieve her goal if she invests44,400 today and earns 7%? b. If Starla invests a total of 44,400 through a seriesof 12 equal annual installments instead of a single amount, wouldStarla accumulate the desired 100,000? The first investmentwould be made one year from today. Show calculations andexplain what you find. c. If the amount accumulated in part A does not equal100,000, approximately how many years would be required, assumingthe same interest rate and equal annual deposits as above.

Explanation / Answer

7% / 12

-3,700

$100,000

25.17

Calculating Future worth of Investement(FV): (Using Ms-Excel "FV" Function) Interest Rate (Rate) 7% / 12 Number of Periods (Nper) 12 Annual Installment Amount (PMT) [$44,400 / 12] -3,700 Future Value of Investement Amount (FV) $45,852.57

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