Can someone assist me with this question .Much appreciated.
Today is your 50th birthday, and you anticipate that you will continue working until your
65th birthday. You currently have $50,000 in a bank account and $200,000 in shares. You
plan to add to these savings by the following annual increments:
i.depositing $2,000 a year for 10 years, and then $4,000 per year, into your bank account, the first deposit to be made today, and the last on your 65th birthday;
ii.adding $6000 to your share portfolio today, and increasing this amount by 4% per annum with the last addition on your 65th birthday.
The bank account is expected to earn 5% per annum, and the share portfolio 12% per annum.
On your retirement aged 65, you intend to deposit all your savings into an investment account that will earn 10% per annum.
What is the value of your savings on your 65th birthday (after you have made your annual deposit)?
Mar 3rd 2009, 08:17 PM
This looks a little tedious, but not particularly difficult. Have you a spreadsheet? Build it a clue at a time and tell us what you get.
Mar 5th 2009, 09:56 AM
The bank account:
The sum of the two above lines would be the value of the total savings at age 65.
Mar 6th 2009, 01:49 AM
My workings thus far. Part A
i) FVAdue= 2000(1.05)^5 –1 * 1.05= $11604
then 2000(1.05)^15 –1 * 1.05 = $45315
ii) Stuck on this part???? Cannot work out the cash flows.
$6000 today meaning FVAdue?
Value of savings on 65th bday?
2000(1.05)^10 –1 * 1.05= $26,414
2000(1.05)^15 –1 * 1.05 = $45,315
Stuck on ii) $$$$$$