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Personal finance: FV of a lump sum, rate of return, expected deposit for retirement

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1. You want to begin a college fund for your newborn child; you hope to accumulate $50,000 by 17 years from now. If a current investment opportunity yields 9 percent, how much must you invest in a lump sum to realize the $50,000 when needed?

2. If you had invested $100/Mo. for the last 5 years into the Fidelity Magellan Mutual Fund, you would now have $11,092 in your mutual fund account. What rate of return have you earned on your investment of $100 per month?

3. If you purchase a diamond for $6,000 today and sell it for $7,500 in three years, what would be your annual rate of return on the investment?

4. If prices are expected to increase by 1% per year, how much do you need in your retirement
account if you want $3,500 per month in today's dollars. You expect to retire in 35 years, the rate of return on your retirement account is 10%, and you want to receive money from your account for 25 years?

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Solution Summary

For problems 1, 2 and 3, the solution is given in a short sentence. For problem 4, the response is divided into 3 parts with good explanations and answers.

Solution Preview

1. The lump sum to invest is $11,553

2. Rate of return is 1.92%

3. The annual rate of return is 6.17%

4. The ...

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