04 May Financial Valuation (Time-Value of Money)
Question 1
| Barry learned in an online investment course that he should start investing as soon | |
| as possible. He had always thought that it would be smart to start investing after he | |
| finishes college and when his salary is high enough to pay the bills and to have money | |
| left over. He projects that will be 5–10 years from now. Barry wants to compare the | |
| difference between investing now and investing later. A financial advisor who spoke | |
| to Barry suggested that a Roth IRA (Individual Retirement Account) would be a good | |
| investment for him to start. | |
| 1. If Barry purchases a $2,000 Roth IRA when he is 25 years old and expects to | |
| earn an average of 6% per year compounded annually over 35 years (until he is | |
| 60), how much will accumulate in the investment? | |
| Initial Investment (PV) | |
| Quoted Rate | |
| Compounding Frequency | Choose one |
| Number of compoundings (m) | For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 |
| Quoted Rate divided by m = RATE | |
| Number of Years | |
| NPER (Num. of years * m) | |
| Ending Amount (FV) |
Question 2
| At 45 years of age, Seth figured he wanted to work only 10 more years. Being a full-time landlord had a lot | |||
| of advantages: cash flow, free time, being his own boss—but it was time to start thinking toward retirement. | |||
| The real estate investments that he had made over the last 15 years had paid off handsomely. After selling a | |||
| duplex and paying the associated taxes, Seth had $350,000 in the bank and was debt-free. With only 10 years | |||
| before retirement, Seth wanted to make solid financial decisions that would limit his risk exposure. Fortunately, | |||
| he had located another property that seemed to meet his needs— a well maintained four-unit apartment. The | |||
| price tag was $250,000, well within his range, and the apartment would require no remodeling. Seth figured he | |||
| could invest the other $100,000, and between the two hoped to have $1 million to retire on by age 55. | |||
| 2. Seth’s current bank offers a 1-year certificate of deposit account paying 2% compounded semiannually. | |||
| A competitor bank is also offering 2%, but compounded daily. If Seth invests the $100,000, how much more | |||
| money will he have in the second bank after one year, due to the daily compounding? | |||
| Current Bank | Competitor Bank | ||
| Semiannually | Daily | ||
| Initial Investment (PV) | |||
| Quoted Rate | |||
| Compounding Frequency | Semiannually | Daily | Choose one |
| Number of compoundings (m) | For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 | ||
| Quoted Rate divided by m = RATE | |||
| Number of Years | 1 | 1 | |
| NPER (Num. of years * m) | |||
| Ending Amount (FV) | |||
| Difference in FV | =D36-C36 |
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.