1. You are 18 today want to retire at age 65. Starting with the day of your retirement, you would like to have an annuity initially in the amount of $35,000 per year (but growing at a 3% annual rate) for 35 years. You will inherit $30,000 from your long lost uncle when you turn 34 and save that money as part of your financial plan. Assume an interest rate of 7% for all periods? How much must you put into your investment account today to achieve your goal?
2. You invest $12,500 in an investment that will pay you $25,000 at a future point in time. What is the return on investment for each of the following periods of time?
a. 4 years
b. 7 years
c. 10 years
3. You want to retire at age 50; you are 20 years old today. You want to retire with a $10,000 perpetuity because you expect to live forever. In order to completely fund that perpetuity, how much do you need to save today in the bank assuming a 10% interest rate.