I need the answer for 7-5 only plz. Mark saves a fixed percentage of his salary
ID: 2494695 • Letter: I
Question
I need the answer for 7-5 only plz. Mark saves a fixed percentage of his salary at the end of each year. This year he saved $1500. For the next 5 years, he expects his salary to increase at an 8% annual rate, and he plans to increase his savings at the same 8% annual rate. He invests his money in the stock market. There thus will be six end of year investments. Solve the problem by using the geometric gradient factor.
How much will the investment be worth at the end of the six years if they increase in the stock
market at a 8% annual rate? The best answer is
Mark saves a fixed percentage of his salary at the end of each year. This year he saved $1500. For the next 5 years, he expects his salary to increase at an 8% annual rate, and he plans to increase his savings at the same 8% annual rate. He invests his money in the stock market. There thus will be six end of year investments. Solve the problem by using the geometric gradient factor. 7-4: How much will the investment be worth at the end of the six years if they increase in the stock market at a 10% annual rate? The best answer is O $13,853 How much will the investment be worth at the end of the six years if they increase in the stock O $13,512 O $12,911 O $13,224 7-5: market at a 8% annual rate? The best answer is O $13,853 O $13,512 O $12,911 O $13,224Explanation / Answer
Answer:
Given the information is:
Mark first year savings: $1,500
Time (n) = 6
Annual interest rate: 8%
According to the geometric gradient factor, we have to find present worth of the factor then the future worth. Here i% = g%, hence the geometric gradient to present worth equation:
Present worth (P) = A n(1+i)-1
= $1,500 (6)(1.08) -1
= $8,333
Future worth (F) = P(F/P, 8%, 6)
= $8,333 (1.587)
= $13,224
The investment worth at the end of the six years is: $13,224 with 8% annual interest rate.