1. Time Value of Money Problem:You wish to retire in
30 years and you wish to accumulate $1,000,000 for your use. If
you're starting today with $25,000, and you plan on putting money away each
month, how much must you invest each month when using an 8% rate of compounding
to obtain your goal.
Secondly, if you wish to draw funds from this
retirement account upon retirement, and the level of interest rate is 7% at
that time, how much will you be able to withdraw as an income each month over a
25 year time span?
2. You're concerned with the sales level over the next
12 months as the markets and overall economy have swung up and down
over the last two years, and, there is reason to believe (make a case for) both
better and worse times over the next 1 year.
Your analysts tell you that sales should grow by 30%
if the economy is strong. If the economy holds steady, you'll see a
5% increase due to the general level of inflation in the market
place. And, if the economy slides into recession, you can expect to see
a 30% decline in sales over the next year.
Last year sales were 10,000,000 and your analysts tell
you that there's a 60% probability that the market will stay 'as is'; a 15%
probability of a strong economy; a 25% probability of a
recession. What is the expected level of sales in the next 12 months