2023 Case Application TIME VALUE OF MONEY Richard e mailed that he and Monica differed | Assignments Online
2023 Case Application TIME VALUE OF MONEY Richard e mailed that he and Monica differed | Assignments Online
Assignments Online 2023 Business & Finance
Case Application
TIME VALUE OF MONEY
Richard e-mailed that he and Monica differed about the impact of his extra spending over the past 15 years. He calculated it at about $3,000 a year. He said the total cost of $45,000 was well within his capability the makeup. Monica said the cost was much greater and asked that they compute it. They were offered and investment of $20,000 that would pay $70,000 in 20 years. They want to know if they should take it. Finally there is an annuity that Richard could sign up for at work. It would cost $100,000 at age 65 and provide payments of $8,000 per year over his expected 17-year life span. He want to know if it is attractive. The appropriate market rate of return on investments in 7 percent after tax.
Case Applications
- Calculate what the $3,000-per-year deficit, had it been invested, would have amounted to at the end of the 15-year period
- Explain to Richard what compounding is and how it affected the cumulative amount received in question 1
- Calculate the return on the proposed $20,000 investment and indicate the factors entering into your recommendation to accept reject it.
- Indicate the expected return on annuity and whether it should be accepted or rejected.
- Construct an explanation of the time value of money for the financial plan using your answers tp questions 1 through 4 in this part of the financial plan to help you communicate the time value information to Richard and Monica
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