eau are offered the following investment opportunity, If you invest $100 today,

Question

eau are offered the following investment opportunity, If you invest $100 today, you vwill receive $60 in one year and $70 in two years. What is the rate of return? A. 15% B.19% C, 20% D, 25% E, 30% The following information applies to the next two problems) Your sister turned 35 today, and she is planning to save $7000 per year for retirement, with the first deposit to be made one year from year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 25 years after retirement, to age 90. After she retires, she plans to spend an equal amount each year, with the first withdrawal today. She will invest in a mutual fund that's expected to provide a return of 15% per made at the gnd of her first retirement year. 39. How much savings will your sister have when she retires? A. $210,000 B. $475,845 C. $511,533 D. $723,796 E. $778,081 40. How much can your sister spend cach year after she retires? A. $58,601 B. $61,686 C. $64,932 D. $68,179 E. $71,588 END

Explanation / Answer

1.
Option B
-100+60/(1+r)+70/(1+r)^2
=>r=18.882%

2.
a)
Option D
Using financial calcualtor:
PMT=7000
PV=0
N=30
I/Y=7.5%
CPT FV=$723,795.82

b)
Option C
Using financial calcualtor:
PV=$723,795.82
N=25
I/Y=7.5%
FV=0
CPT PMT=64932.21

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