After reading Chapters 3 and 4 of your textbook, address each of the following questions: Think of...

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After reading Chapters 3 and 4 of your textbook, address each of the following questions:  Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000. Use the “Present Value Formula”, which computes how much money you need to start with now to achieve the desired monetary goal. Assume you will find an investment that promises somewhere between 5% and 10% interest on your money (you choose the rate) and pretend you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.) How much do you need to invest today to reach that desired amount 12 years from now?You wish to leave an endowment for your heirs that goes into effect 50 years from today. You don’t want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?

Soumi · Accepted Answer

Running Head: FINANCIAL MANAGEMENT
Financial Management		2
FINANCIAL MANAGEMENT
1)
From the given situation, it can be observed that there is a requirement to purchase a car in the future, the cost of which will be around $20,000. The car will be purchase after 12 years and monthly investment is required for purchasing the car after 12 years. As stated by Jappelli and Padula (2013), investment should be given ample time to grow. The assumed rate of return will be 7.5%, which is neither too risky nor too low.

After reading Chapters 3 and 4 of your textbook, address each of the following questions: Think of something you want or need for which you currently do not have the funds. It could be a vehicle,...

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