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4 Jan 2018

Please show work : If you were to save $3000 per year to your age 65 (assume you invested in common stocks) with a rate of return of 10%, how much money will you have?

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13. You want to retire has a millionaire. How much do you need to put away each month if: A. You use common stocks and have an average return of 10%? B. You use corporate bonds and have an average return of 6%? C. You use government bonds and have an average return of 4%? D. You put your money in a CD at 3.5% interest rate? (Please use your own age. If you are over 45, please solve for saving a $100,000.)

Time Value of Money Project

Name: __________________

Please show all your work if you use the Calculator. If done in Excel, please send me the spreadsheet / workbook.

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Coupon 8%

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The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30.What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm?

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Page Two

Preferred stock has a dividend of $12 per year.The required return is 6%.What should be the price per share?

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What is the estimated value of a share of common stock?

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You take out a $200,000 mortgage for 20 years at 6%.

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What is the principle and interest on the twelfth payment?

How much interest will you pay over the 20 years?

You bought a house 8 years ago with a $250,000 mortgage.It was a 15 year loan with monthly payments which will pay off the loan when you make the last payment. The interest rate was 6%.What are your monthly payment and your current loan balance?How much interest will you pay in the upcoming year?

Page Three

You want to retire has a millionaire. How much do you need to put away each month if:

You use common stocks and have an average return of 10%?

You use corporate bonds and have an average return of 6%?

You use government bonds and have an average return of 4%?

You put your money in a CD at 2.5% interest rate?

(Please use your own age. If you are over 45, please solve for saving a $100,000.)

You are offered a contract with a signing bonus. If they offered you either $215,000 in cash or $2,000 a month for 15 years, guaranteed, which do you take (based strictly on the math)? Your safe rate of return is 7.5%.

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You are 41 years old today and want to plan for retirement at age 65. You want to set aside an equal amount every year from now to retirement. You expect to live to age 87 and want to withdraw a fixed amount each year during retirement that at age 65 will have the same purchasing power as $99,349 has today. You plan on withdrawing the money starting the day you retire. You have not saved any money for retirement. Inflation is assumed to be 4.0% in the future. You expect to earn an 8.5% return on your investments in the future. How much do you need to save each year until retirement to meet your goal?

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