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.
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)?
My workings thus far.
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) $$$$$$
=Savings Amount / (1-(1.10)^-20 = ?????