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Problem 5-7
Present and future values of a cash flow stream

An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $400 at the end of Year 5, and $600 at the end of Year 6.

 

If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent.

 

If other investments of equal risk earn 4% annually, what is its future value? Round your answer to the nearest cent.

 

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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$
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$
The present value of $800 due in 1 year at a discount rate of 5.6%. Round your answers to the nearest cent.

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Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $55,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today; and he will then receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has $55,000 saved, and he expects to earn 9% annually on his savings. How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal?

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