# A financial planner recommends that you have accumulated \$2.0 million by the time that you retire [Solved]

Question 1

A financial planner recommends that you have accumulated \$2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of 5%, how much must you invest for each of the next 25 years in order to achieve this goal? Financial Planning: Every individual, with or without the help of a professional financial planner, at some point engages in the process of projecting his/her financial needs and taking steps to meet those needs. This process is called financial planning.

Question 2

A financial planner recommends that you have accumulated \$2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of 5%, how much must you invest for each of the next 25 years in order to achieve this goal?

Question 3

Your parents tell you that if you apply yourself and earn a minimum grade of B​ – in Finance​ 3101, they will reward you by depositing in your account​ \$1,050 next​ year, \$1,500 the following year and​ \$2,500 the year after that. If you can earn an annual rate of​ 4%, how much would you have in your account immediately after your​parents’ final​ deposit?

A.​\$5.050.00

B.​\$5,252.00

C.​\$5,175.80

D. ​\$5,195.68

Your parents have promised you possible deposits of​ \$!,050, \$1,500 and​ \$2,500 at the end of the next three​ years, respectively. If your parents can earn​ 6% per​ year, what size of a​ one-time deposit would they have to make today in order to keep their​ promise?

A.​\$5,050.00

B.​\$5,317.64

C.​\$4,459.18

D.​\$4,424.61

A security that is selling for​ \$3,000 and promises to pay annual interest or​ \$250 forever would have an annual yield of

A.8.33%

B.12.00%

C.1.20%

D.​11.00%

You deposit​ \$150 at the end of each of the next 12 years earning​ 9.00% per year. What would your balance be at the end of the 12​ years?

A.\$3,021.11

B.\$2,753,66

C.​\$1,200.00

D.\$4,404.14

You borrow​ \$200,000 for 18 years at an annual rate of​ 5.20%.. What would be your fixed QUARTERLY loan​ payment?

A.​\$3,694

B.​\$8,134

C.​\$4,294

D.\$6,027

For an​ 18-year fixed payment loan for​ \$200,000 with an annual interest rate of​ 5.20% and making QUARTERLY​ payments, what percent of your first payment would apply to the​ principal?

A.​39.45%

B.51.17%

C.​45.87%

D.​38.16%

A financial planner recommends that you have accumulated​ \$2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of​ 5%, how much must you invest for each of the next 25 years in order to achieve this​ goal?

A.​\$41,905

B.​\$38,179

C.​\$36.553

D.​\$43,879

Present value. A​ smooth-talking used-car salesman who smiles considerably is offering you a great deal on a​ “pre-owned” car. He​ says, “For only 44 annual payments of ​\$2,6002,600​, this beautiful 1998 Honda Civic can be​ yours.” If you can borrow money at 10​%,what is the price of this​ car? Assume the payment is made at the end of each year.

Let

FV = future value = \$2,000,000

PMT = periodic payment

r = interest rate = 5%

n = number of periods = 25

The balance is the future value of the annuity of deposits:

P =     FV (r)
​       (1+r)n – 1

= \$2000000 (0.05)
(1+0.05)25 – 1

= \$41904.91

Investment amount every year for 25 years = \$41904.91

1. Your parents tell you that if you apply yourself and earn a minimum grade of B​ – in Finance​ 3101, they will reward you by depositing in your account​ \$1,050 next​ year, \$1,500 the following year and​ \$2,500 the year after that. If you can earn an annual rate of​ 4%, how much would you have in your account immediately after your​parents’ final​ deposit?

FV = 1,050 * (1 + 0.04)^2 + 1,500 * (1 + 0.04)^1 + 2,500

FV = \$5,195.68 (OPTION D)

2. Your parents have promised you possible deposits of​ \$1,050, \$1,500 and​ \$2,500 at the end of the next three​ years, respectively. If your parents can earn​ 6% per​ year, what size of a​ one-time deposit would they have to make today in order to keep their​ promise?

PV = 1,050/(1 + 0.06)^1 + 1,500/(1 + 0.06)^2 + 2,500/(1 + 0.06)^3

PV = \$4,424.608905338