nuepenuent Authors Abo An investor plans the following investments for the next
ID: 2813121 • Letter: N
Question
nuepenuent Authors Abo An investor plans the following investments for the next 20 years: 9.00 years of $10,325.00 per year, and 11.00 years of $13,800.00 per year. She thinks his investments will earn 6.00% a year for the first 9.00 years, and then earn 10.00% per year for the last 1 1 00 years. How much would the investor have to set aside today if she wants to fund the entire account? Answer Format: Currency: Round to: 2 decimal places. Enter Answer Here... Prev Problem t All Problems Next Problem Contact Us Privacy Pollay TermExplanation / Answer
Present Value (PV) of Cash Flow: (Cash Flow)/((1+i)^N) i=interest rate N=Year of Cash Flow i=6%=0.06 fromyear 1 through9 i=10% from year 10through 20 Present Value of investment of 11 years from year 10 through 20 N A B=A/(1.1^N) Year Investment Value at end of year 9 1 $13,800.00 $ 12,545.45 2 $13,800.00 $ 11,404.96 3 $13,800.00 $ 10,368.14 4 $13,800.00 $ 9,425.59 5 $13,800.00 $ 8,568.71 6 $13,800.00 $ 7,789.74 7 $13,800.00 $ 7,081.58 8 $13,800.00 $ 6,437.80 9 $13,800.00 $ 5,852.55 10 $13,800.00 $ 5,320.50 11 $13,800.00 $ 4,836.82 SUM $ 89,631.84 Value of 11 years investment at end of year 9 $ 89,631.84 A Present Value of 11 years investment $ 53,052.95 (89631.84/(1.06^9) 1 Present Value of investment of 9 years from year 1 through 9 N A B=A/(1.1^N) Year Investment Value at end of year 9 1 $10,325.00 $ 9,740.57 2 $10,325.00 $ 9,189.21 3 $10,325.00 $ 8,669.07 4 $10,325.00 $ 8,178.37 5 $10,325.00 $ 7,715.44 6 $10,325.00 $ 7,278.72 7 $10,325.00 $ 6,866.71 8 $10,325.00 $ 6,478.03 9 $10,325.00 $ 6,111.35 SUM $ 70,227.47 B Present Value of 9 years investment $ 70,227.47 A+B Amount investor need to set aside today $ 123,280.42 ANSWER: $ 123,280.42
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