You are considering two savings plans for your future retirement.Option 1: Deposit R1000 at the end of each quarter for the first 12 years. At the end of 12years, make no further deposits, but leave the amount accumulated at the end of 12 yearsfor the next 13 years.Option 2: Do nothing for the first 12 years. Then deposit R6000 at the end of each year forthe next 13 years.If your deposits or investments earn at an interest rate of 6% compounded quarterly, which ofthe following statement is the most accurate? With Option 2, when compared with Option 1,you will be able to accumulateA. R29 863 more at the end of 25 years from nowB. R33 424 more at the end of 25 years from nowC. R37 090 less at the end of 25 years from nowD. R41 526 less at the end of 25 years from nowE. None of the above

Step 1 Analysis We need to use the future value of the ordinary annuity formula to calculate the…

Answered: Option 1: Deposit R1000 at the end of…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.1: Why Save?

Problem 6R

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Bobby has heard the importance of saving early for retirement. He wants to retire in 35 years. But he really likes traveling. Right now, he spends, on average, about $600 a month traveling. He is trying to decide if he should start saving his travel money for retirement now, or if he can continue traveling a few more years before beginning to save. Assume that he can find an annuity that pays 4.75% compounded quarterly. What is his future value if: a) He starts saving now? N: P/Y: I%: C/Y: PMT: End or Begin $54,911.29 $658,935.54 $823,669.42 1,000,000.00
How much is accumulated over two years in each of the following savings plans? a.$40at the end of each month for 24 months at 12 percent compounded monthly b. $30 at the end of the first month, $31 the end of the second month, and so forth, increasing by$1per month, at 12 percent compounded monthly
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1. You want to start to save for a major purchase. You can invest P320 every three months for 3 years and 9 months and you can earn 5.34% compounded quarterly. What is the amount of interest that you make during the entire term? 2. Jamie is saving $10,000 at the end of each month. How soon can she retire if she wants to have a retirement fund of F250,000.00 and interest is 4.36% compounded monthly?
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a. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded quarterly? b. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded monthly? c. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded daily? d. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded continuously? e. At what compounding period does the effective annual interest rate very closely approximate continuous compounding? (Consider to the nearest 0.0001)
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