Angela wants to take the next five years off work to travel around the world. Sh

Question

Angela wants to take the next five years off work to travel around the world. She estimates her annual cash needs at $34,000 (if she needs more, she will work odd jobs). Angela believes she can invest her savings at 10% until she depletes her funds. ve (Click the icon to view Present Value of $1 table ) (Click the icon to view Present Value of Ordinary Annuity of $1 e table.) (Click the icon to view Future Value of SI table.) Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements Requirement 1. How much money does Angela need now to fund her travels? (Round your answer to the nearest whole wet dollar.) of S shl with the 10% interest rate, Angela needs $ Requirement 2. After speaking with a number of banks, Angela learns she wil only be able to invest her funds at 6%. How much does she need now to fund her travels? (Round your answer to the nearest whole dollar) with a 6% interest rate, Angela would need $ If Angela's savings are earning a lower interest rate (6%), she will need to save- td to be able to withdraw S34.000 per year ware tha OE of d Enter any number in the edit fields and then continue to the next question. MacBook Pro F12 Dll F8 F10 a3 F7 F9 F6

Explanation / Answer

Requirement-1 PV of annuity for making annual payment P = PMT x (((1-(1 + r) ^- n)) / r) Where: P = the present value of an annuity stream            34,000 PMT = the dollar amount of each annuity payment r = the effective interest rate (also known as the discount rate) 10% n = the number of periods in which payments will be made                       5 Initial Saving level= 34000*(((1-(1 + 10%) ^-5)) /10%) Initial Saving level=          128,887 Requirement-2 PV of annuity for making annual payment P = PMT x (((1-(1 + r) ^- n)) / r) Where: P = the present value of an annuity stream            34,000 PMT = the dollar amount of each annuity payment r = the effective interest rate (also known as the discount rate) 6% n = the number of periods in which payments will be made                       5 Initial Saving level= 34000*(((1-(1 + 6%) ^-5)) /6%) Initial Saving level=          143,220

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