Charlie Stone wants to retire in 35 years(he is currently 22) and be able to wit
ID: 2752543 • Letter: C
Question
Charlie Stone wants to retire in 35 years(he is currently 22) and be able to withdraw $250,000 per year for 15 years. Charlie wants to receive the first payment at the end of the 35th year. Using annual interest rate of 10%, how much should Charlie deposit at the end of each of the 35 years in order to achieve this goal? The answer is $7,717.65 but I am looking for an explaination of the problem and the steps to solve it.
A firm issued 2 million worth of commercial paper that has a 90 day maturity and sells for 1,900,000. The bond equivalent yield on the issue of commercial paper is closest to: I don't know the answer to this problem but the options are a. 5.54% b.10.02% c.17.79% d.21.34% e. none of the above
Explanation / Answer
Present value of annuity due = P+P×[1-(1÷(1+r)^(n-1))]÷r
r is interest rate per period
P is payment per period
n is number of payments
= $250,000+$250,000×[1-(1÷(1+10%)^(15-1))]÷10%
= $2,091,671.86
Future value of annuity = P×[(1+r)^n-1]÷r
r is interest rate per period
P is payment per period
n is number of payments
$2,091,671.86 = P×[(1+10%)^35-1]÷10%
Annual deposit, P = $7,717.65