(1) The Martin family recently deposited $1,000 in a bank account that pays a 3 percent nominal...

Question:

(1) The Martin family recently deposited $1,000 in a bank account that pays a 3 percent nominal interest rate. Interest in the account will be compounded daily (365 days = 1 year). How much will they have in the account after 5 years?

(2)Today, Bruce and Brenda each have $150,000 in an investment account. No other contributions will be made to their investment accounts. Both have the same goal: They each want their account to reach $1 million, at which time each will retire. Bruce has his money invested in risk-free securities with an expected annual return of 6 percent. Brenda has her money invested in a stock fund with an expected annual return of 10 percent. How many years after Brenda retires will Bruce retire?

(3) Today is your 20th birthday. Your parents just gave you $5,000 that you plan to use to open a stock brokerage account. Your plan is to add $500 to the account each year on your birthday. Your first $500 contribution will come one year from now on your 21st birthday. Your 45th and final $500 contribution will occur on your 65th birthday. You plan to withdraw $5,000 from the account five years from now on your 25th birthday to take a trip to Europe. You also anticipate that you will need to withdraw $10,000 from the account 10 years from now on your 30th birthday to take a trip to Asia. You expect that the account will have an average annual return of 12 percent. How much money do you anticipate that you will have in the account on your 65th birthday, following your final contribution?

(4) If a 5-year ordinary annuity has a present value of $1,000, and if the interest rate is 12 percent, what is the amount of each annuity payment?

(5) Today is your 23rd birthday. Your aunt just gave you $1,000. You have used the money to open up a brokerage account. Your plan is to contribute an additional $2,000 to the account each year on your birthday, up through and including your 65th birthday, starting next year. The account has an annual expected return of 12 percent. How much do you expect to have in the account right after you make the final $2,000 contribution on your 65th birthday?

(6) A stock is expected to pay a $0.45 dividend at the end of the year (D1 = 0.45). The dividend is expected to grow at a constant rate of 4 percent a year, and the stock’s required rate of return is 13 percent. What is the expected price of the stock 10 years from today?

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,... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... 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...