Assignment 1: Financial Decisions In Tutorial Library

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TITLE: Assignment 1: Financial Decisions

UNIVERSITY / INSTITUTE: Strayer University



Assignment 1: Financial Decisions

Read Problems 35 and 36 at the end of Chapter 4. Prepare a report (3-4 pages) with your

conclusions; show calculations.

35. You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 30th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to make sure that you will have $2 million in the amount on your 65th birthday?

36. You realize that your plan in Problem 35 has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 3% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.)

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