Question
1.) Guy wants to invest in a fund that he can let sit for 12 years then cash out for $15,000 at EOY 12. If
1.) Guy wants to invest in a fund that he can "let sit" for 12 years then "cash out" for $15,000 at EOY 12. If the expected annual interest rate is 5%, what is the amount he should invest today (at EOY 0)?
2.)You have $1,500,000 accumulated in a retirement account. Assuming you want a uniform 25-year payout from this lump sum (i.e., a 25 year annuity), how much will your annual "withdrawal" from the account be? Assume a nominal rate of 3%.
3.) Alt A's useful life would commence at the start of FY23 and finish at the end of FY27. Alt B's useful life would commence at the start of FY25 and finish at the end of FY27. Alt C's useful life would commence at the start of FY24 and finish at the end of FY38. Applying the repeatability assumption, what is the minimum study period for comparing the PW of these three alternatives?
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