Provide 1 response to each student post. Each response should be 150 words each. Turnitin and Waypoint is being used to check for plagiarism and Please use APA format. Please pay close attention to plagiarism, and it's not tolerated.
Yesterday Jul 9 at 4:22pm
Think of something you want or need for which you currently do not have the funds. How much do you need to invest today to reach that desired amount 12 years from now?
A product I want is a Rolex. Specifically, the Day-Date 40 Oyster, 40 mm, in yellow gold. This watch is currently priced at $34,850. Using the Present Value Formula as follows: PV=FV (1+r)^-n assuming an interest rate of 6% and a time frame of 12 years we would calculate the amount needed to invest today as follows:
PV = 34,850 (1 + .06)^-12
PV = 34,850 (1.06)^-12
PV = 34,850 (0.496969)
PV = 17319.38
To afford the Day-Date 40 in 12 years, I will need to invest $17,319.38 at a rate of 6% today.
You wish to leave an endowment for your heirs that goes into effect 50 years from today. 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?
I would like to $5000 spent yearly to fund this party. Assuming a 6% interest rate I’ve determined
PV = CF / R
PV = 5000 / .06
PV = 83,333.33
I will want to leave at least $83,333.33 in the endowment in order for my heirs to accrue $5,000 in interest yearly.
83,333.33 = CF*(1.06^50-1) / .06
83,333.33 = CF*(17.4201) / .06
83,333.33 = CF*290.335
CF = 287.024
I will have to invest $287.02 annually in order to fund the annuity in 50 years.
Reference
Byrd, J., Hickman, K., & McPherson, M. (2013).Managerial Finance[Electronic version]. Retrieved from https://content.ashford.edu/
Yesterday Jul 9 at 1:34pm
For the first part ot the discussion, I was using $25,000 to purchase a Harley Davidson at 10%interest rate for 12 years.
C=single cash flow $25,000
R=interest rate 10%
N=number of periods 12 years
PV=25,000/(1+.10)^12
=25,000/1.1^12 =$7,965.77 at the end of 12 years with 10% interest each year will be at the $25,000.
For the second part of the discussion, I will place $7,000 a year for 50 years earning 8% yearly with this formula:
C=single cash flow $7,000
R=interest rate 8%
N=number of periods 50
FV=C*(1+r)^n =7,000*(1+.08)^50= total of $328,311.30
So, for the grand party yearly for 50 years they will get $7,000 a year for the event.
References
Byrd, J., Hickman, K., & McPherson, M. (2013).
Managerial finance
[Electronic version]. Retrieved from https://content.ashford.edu/