1 Calculate what the $3,000 per year deficit, had it been invested, would have amounted to at the end of the 15 year period 2 Explain to Richard what compounding is and how it affected the cumulative amount received in question 1 3 Calculate the return on the proposed $20,000 investment and indicat...

1 15 N 7 IY 3000 CHS PMT press FV 7538706 2 Compounding is interest on interest in addition to inter ...

1. Calculate what the $3,000-per-year deficit, had it been invested, would have amounted to at the end...

Question:

1. Calculate what the $3,000-per-year deficit, had it been invested, would have amounted to at the end of the 15-year period.
2. Explain to Richard what is and how it affected the cumulative amount received in question 1.
3. Calculate the return on the proposed $20,000 investment and indicate the factors entering into your recommendation to accept or reject it.
4. Indicate the on the and whether it should be accepted or rejected.
5. Explain the time value of money for the financial plan using your answers to questions 1 through 4 in this part of the financial plan to help you communicate the time value information to Richard and Monica.
Richard e-mailed me 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 to make up. Monica said the cost was much higher and asked that they compute it. They had been offered an investment of $20,000 that would pay $70,000 in 20 years. They want to know if they should take it. Finally, Richard could sign up for an 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 wants to know if it is attractive. The appropriate market rate of return on investments is 7 percent after tax.
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...