2/9/2021 Thread: Week 4 DB – 2021SP-12693-FINC3304-Business Finance
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Thread: Week 4 DB2021SP-12693-FINC3304-Business Finance Discussion Board Forum: Week 4 DB
Thread: Week 4 DB
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Week 4 DB
2 days agoMassoud Metghalchi
1. Assume you drink one co�ee per day, 5 days a week. Assume co�ee price is $4.00. That
makes it $20 per week and $80 per month. Assume you can invest $80 per month in the
stock market and assume you can earn 1 % per month on your stock investment or 12
% per year.
Time Value of Money
THIS DISCUSSION BOARD REMAINS ACTIVE TILL From 2/8 to 2/14
Each student should answer question 1 &2. Answer to the question 1 is related to your actual age.
Simplify your age to the month, if for example your age is 20 years 1 month and 19 days, use 20
years and 2 months. If your age is 34 years and one month and 3 days, use 34 years and one
month, in other words,
ing your age to closest month.
IMPORTANT NOTE: When answering a question, copy the whole question (Don’t write Q1 or Q2) so
that another student see your answer, he or she can relate the answer to the question.
A: At your retirement, when you are 65 years old, how much you will have in your retirement
account if you switch from co�ee drinking to investing in the stock market?
B. Assume that when you get to 65 (retirement age) you switch your funds from stock market
investment to bond market investment. Assume you can earn 7% on your bond investment. You
decide to withdraw a constant amount each year for the next 20 years when you get to retirement
age of 65. How much will be your annual withdrawal from age 66 to 85 (Nothing left at 85) if you
switch your co�ee drinking to stock and bond investments.
?
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2/9/2021 Thread: Week 4 DB – 2021SP-12693-FINC3304-Business Finance
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2. Given your age, and assume average stock market return is 10% per yea
compounded monthly; how much per month you should save (In IRA or 401 K,
or other tax defer retirement accounts) to accumulate $1,000,000.00 when you
get to 67 retirement age?
I start �rst answer Q1 so that you can see the format: Assume I am 54 and I retire at age 68, how
much will be the total amount of money in my account if I switch from co�ee drinking to investing
in the stock market? B) How much a can withdraw per year after I get 68 years old, for 20 years?
ANSWER:
Assume I am 54 years old and will retire at age 68:
Retire in 14 years at age 68.
Excel
1.a
Inputs
Interest 1.00%
Period XXXXXXXXXX*12)
Payment 80
FV ($34,567.76)
FV(B7,B8,B9,0,0);
B7,B8,B9=1%,168,80
1.
inputs
Interest 7.00%
Period 20
PV ($34,567.76)
PMT $3,262.95
PMT(B16,B17,B18,0,0)
B16,B17,B18=7%,20,
(34567)
2/9/2021 Thread: Week 4 DB – 2021SP-12693-FINC3304-Business Finance
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Mathematical Formula
1.a
(1 + i)n = XXXXXXXXXX
(1 + i)n -1 = XXXXXXXXXX
[(1 + i)n -1]/i = XXXXXXXXXX
PMT[(1 + i)n -1]/i = $34,567.76
1.
(1 + i)n = XXXXXXXXXX
1/(1 + i)n = XXXXXXXXXX
[1-1/(1 + i)n] = XXXXXXXXXX
[1-1/(1 + i)n]/i = XXXXXXXXXX
PV = $34,567.76
PMT = $3,262.95
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chapter 5 homework problems assigned
CHAPTER 6
CHAPTER 7: