6. Assume you purchased a stock this year for $28.16 a share. What price will th

Question

6. Assume you purchased a stock this year for $28.16 a share. What price will the stock have to reach in 47 years, if-you want to realize an annualized return of 10% upon its sale? 7. To have $30,000 ready for a down payment for a mortgage loan from a bank in five years, how much should you have in the bank today,given a 10% interest rate? in live 8. Lois I. Likesmoney expects to receive $50,000 in payments from a trust fund for each of the next 20 years. What is the current value of this stream of payments if it is discounted 5 0l000 I.O8 5o.uuo 1,0s 9. How much could you wind up with in the year 2037, if you currently have $5,000 in your mutual fund, and earn 4% each year on it between now and then? What if you could earn 8% instead?

Explanation / Answer

7) PV = F(P/F, i, n)

       = 30,000(P/F, 1%, 5)

      = 30,000(0.9515)

      = $28,545

Thus, you should have $28,545 in the bank today.

8) PV = A(P/A, i, n)

          = 50,000(P/A, 8%, 20)

          = 50,000(9.8181)

         = $490,905

The the current value of the payment stream is $490,905.

9) At i = 4%

FV = P(F/P, i, n)

         = 5000(F/P, 4%, 20)

         = 5000(2.191)

         = $10,955

At i = 8%

FV = P(F/P, i, n)

         = 5000(F/P, 8%, 20)

         = 5000(4.661)

         = $23,305

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