Author Question: Assume that you are 23 years old and that you place 3,000 year-end deposits each year into a stock ... (Read 134 times)

ts19998 · **on:** Jul 10, 2018

Assume that you are 23 years old and that you place 3,000 year-end deposits each year into a stock index fund that earns an average of 9.5 per year for the next 17 years.

How much money will be in the account at the end of 17 years? How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5 per year but you discontinue making new contributions? How much money would you have at the end of 17 years if you had made the same number of deposits but at the beginning of the year instead of at the end of the year? How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5 per year but you discontinued making new contributions?
What will be an ideal response?

Question 2

Charlene owns stock in a company which has consistently paid a growing dividend over the last five years. The first year Charlene owned the stock, she received 1.71 per share and in the fifth year, she received 2.89 per share.

What is the growth rate of the dividends over the last five years? (Round to the nearest whole number)
A) 7 percent
B) 14 percent
C) 12 percent
D) 5 percent
E) 11 percent

jojobee318 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: FV = PMT = 3,000 = 116,140.50.
Fifteen years later, FV = PV (1 + r)n = 116,140.50 (1.095)15 = 453,101.48.
Because these are annuities due, the solution is to multiply each answer by (1 + r).
The solutions are 116,140.50 (1.095) = 127,173.85 and 453,101.48 (1.095) = 496,146.12.

Answer to Question 2

B