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Finance: Annuity, present value etc,

Sonia Gomez, a 45-year-old widow, wishes to accumulate 4250,000 over the next 15 years to supplement the retirement programs that are being funded by the federal government and her employer. She expects to earn an average annual return of about 8% by investing in a low-risk portfolio containing about 20% short -term securities, 30% common stock, and 50% bonds.

Sonia currently has 431,500 that at an 8% annual rate of return will grow to about $100,000 at the end of 15 years (found using time-value techniques that will be described in Chapter 4 Appendix). He financial adviser indicated that for every $1,000 Sonia wishes to accumulate at the end of the 15 years, when will have to make an annual investment of $36.38. (This amount is also calculated on the basis of an 8% annual rate of return using the time-value techniques that are described in the Chapter 4 Appendix). Sonia plans to accumulate needed fund by making equal, annual, end-or year investments over the next 15 years.

A) How much money does Sonia need to accumulate by making equal, annual, end-of-year investments to reach her goal of $250,000?

A) How much must Sonia deposit annually to accumulate at the end of year 15 the sum calculated in part a?

Solution Summary

The problem set deals with issues in finance including: Annuities, present value etc

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