Response to post- EB ****posts by adding recommendations to extend their thinkin

ORDER YOUR PAPER AND GET QUALITY FOR YOUR MONEY

Response to post- EB****posts by adding recommendations to extend their thinking or posing questions to help them consider components they may have missed*****25Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000. Use the “Present Value Formula”, which computes how much money you need to start with now to achieve the desired monetary goal. Assume you will find an investment that promises somewhere between 5% and 10% interest on your money (you choose the rate) and pretend you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.) How much do you need to invest today to reach that desired amount 12 years from now?I want to take my family to a dream vacation at a Sandale Resort in the Caribbean for $45,000.ExecutePresent Value Formula PV=FV/(1+r)nFuture Value FV= $45,000Number of Periods n=12Interest Rate r= 6%PV= $45,000 / (1+0.06)12 =$22,363.62EvaluateHistorically Home Depot has guarantee a return year after year, for that reason I would invest the initial $22,363.62 investment there so I can take my family to our dream vacation.You wish to leave an endowment for your heirs that goes into effect 50 years from today. You do not want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?ProblemI would like to endow an annual grand party to feed the homeless once a year. I want to budget $20,000 per year forever to fund the party for the homeless. I want my family to invest the money in a local credit union at a 6% yearly.SolutionExecuteI would like to spend $20,000 yearly and forever for my grand soiréeAmount to leave to my heirs 50 years from nowA perpetuity is a stream of equal cash flow that occur at regular intervals and last forever…Present Value of a PerpetuityPV (C in perpetuity) =C/rC = $20, 000r = 6%PV = $20, 000/0.06 = $333,333.33In order for my heirs to have enough money to fund this grand party, I would have to leave $333,333.33How much would I have to invest yearly to fully fund the annuity in 50 yearsPV of annuity = P [(1- (1+r)-n] /rPV= $333,333.33r =6%n =50n=12n=12*12 = 600Solve for PP = payment per period$333,333.33 = P [(1-1.005-600)]/0.005] =27,833.25Amount to invest every year $27,833.25