The Time Value of Money

Mar 12th, 2015
Sigchi4life
Category:
Business & Finance
Price: $35 USD

Question description

Submit a 4-5 page report based on the following problem:
 
Mary has been working for a university for almost 25 years and is now approaching retirement. She wants to address several financial issues before her retirement and has asked you to help her resolve the situations below. Her assignment to you is to provide a 4-5 page report, addressing each of the following issues separately. You are to show all your calculations and provide a detailed explanation for each issue.

Issue A:
For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per year, compounded annually and is expected to continue paying that amount. Mary will make one more $500 deposit one year from today. If Mary closes the account right after she makes the last deposit, how much will this account be worth at that time?

Issue B:
Mary has been working at the university for 25 years, with an excellent record of service. As a result, the board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year for 20 years, starting one year from her retirement date and each year for 19 years after that date. Mary would prefer a one-time payment the day after she retires. What would this amount be if the appropriate interest rate is 7%?

Issue C:Mary’sreplacement is unexpectedly hired away by another school, and Mary is asked to stay in her position for another three years. The board assumes the bonus should stay the same, but Mary knows the present value of her bonus will change. What would be the present value of her deferred annuity?

Issue D:
Mary wants to help pay for her granddaughter Beth’s education. She has decided to pay for half of the tuition costs at State University, which are now $11,000 per year. Tuition is expected to increase at a rate of 7% per year into the foreseeable future. Beth just had her 12th birthday. Beth plans to start college on her 18th birthday and finish in four years. Mary will make a deposit today and continue making deposits each year until Beth starts college. The account will earn 4% interest, compounded annually. How much must Mary’s deposits be each year in order to pay half of Beth’s tuition at the beginning of each school each year?

For questions A-C your going to use excel to input the formula Issue A would be future value and Issue B and C would be present value. Then answer the question for Issue D she was us have four columns for the each equation.

Assignment 2 Grading Criteria

Maximum Points

Calculated the compounded interest over 20 years and evaluated the value of the savings account upon closing. (CO 1)

32

Calculated the bonus payout over 20 years vs. a one time payout with interest and distinguished which bonus option would be better for the client. (CO 1)

32

Calculated the present value of the bonus and analyzed the difference in bonus for the client. (CO 2)

32

Analyzed the tuition costs for the client and determined what the future costs will be and determined how these funds can be accumulated over time. (CO 4)

60

Written Components: Organization, usage and mechanics, APA elements, style

44

Total:

Tutor Answer

(Top Tutor) Daniel C.
(997)
School: New York University
PREMIUM TUTOR

Studypool has helped 1,244,100 students

8 Reviews


Summary
Quality
Communication
On Time
Value
darnay
Nov 28th, 2016
" The best tutor out there!!!! "
dontuwannaknow
Nov 19th, 2016
" Excellent work as always thanks so much "
SjSurvivor143
Nov 5th, 2016
" Thanks for the help. "
ddg82
Oct 27th, 2016
" Thanks, good work "
tinytim47
Oct 14th, 2016
" Wow this is really good.... didn't expect it. Sweet!!!! "
jestin7
Oct 5th, 2016
" This tutor is great! "
mixedballz
Sep 30th, 2016
" excellent work as always thanks for the help "
lilmoe415
Sep 21st, 2016
" Thank you, Thank you, for top quality work, this is your guy!! "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1820 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors