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Question 8 You remember that your finance professor told you to begin the painless job of saving for retirement as soon as possible, so you decided to put away $2,000 at the end of each year in an investment
Question 8 You remember that your finance professor told you to begin the painless job of saving for retirement as soon as possible, so you decided to put away $2,000 at the end of each year in an investment. Your expected annual rate of return on this investment is 7%. How much will you accumulate at retirement after 40 years of investing. I Use the editor to format your answer Question 9 Assuming that the discount rate is 12%, what will be the yearly payment? Use the editor to format your answer
Expert Solution
Q8: Future value of annuity = P*((1+R)^N-1)/N
Where, P = Principal
R = Rate of Interest
N = Number of periods
= 2000*((1+7%)^40-1)/7%
= 2000*((1.07)^40-1)/0.07
= 2000* (14.9744578392-1)/0.07
= 2000 * 199.635111989
= $399270.22
Future value of annuity = $399270.22
Q9:Future value = P*((1+R)^N-1)/N
$399270.22 = P * ((1+12%)^40 -1)/12%
$399270.22 = P* (93.0509704414-1)0.12
P = $399270.22/ 767.091420345
P = 520.50
Payment = 520.50
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