CourseLover

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    Devry University
    Sep-2004 - Aug-2010

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    NatSteel Holdings Pte Ltd
    Aug-2007 - Jul-2017

Category > Management Posted 18 Dec 2017 My Price 10.00

What effect would increase in the interest rate

answer Q (c)

What effect would increase in the interest rate, both during and prior to retirement, have on the values calculated in parts (a) and (b)? Explain why.

2.2 Jenny works as an accountant and is planning to retire in 25 years from now. She is thinking about creating a fund that will allow her to receive $25,000 at the end of each year for 30 years after her retirement. She is expecting to earn 8.5% per year during the 30-year retirement period. Required: a. To provide the 30- year, $25,000 a year annuity, calculate how much should be in the fund account when Jenny retires in 25 years. Future value of fund in 25 years N=30 PMT=($25,000) I=8.5% FV=0 PV=$268,671.10 When jenny retires in 25 years, there should be $268.671.10 in her account. b. How much will Jenny need today as a single amount to provide the fund calculated in part (a) if she earns 6.5% per year during the 25 years preceding retirement? Jenny needs $55,562 today as a lump sum amount. c. What effect would increase in the interest rate, both during and prior to retirement, have on the values calculated in parts (a) and (b)? Explain why. Equivalent lump sum today N=25 PMT=0 I=6.50% FV=$268,671.10 PV=($55,652)
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CourseLover
(12)
Status NEW Posted 18 Dec 2017 08:12 AM My Price 10.00

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