Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Nicholas is keen to apply his financial knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from

Nicholas is keen to apply his financial knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund.

a)How much will Nicholas need to contribute at theendof each month in order to receive$5 000 000 at the age of 60 at a compound return of 8.50% p.a.?

Showformula,variables,calculation,and aconcluding statementin your response.

b)How much will Nicholas need to contribute at thestartof each month in order to receive $5000 000 at the age of 60 at a compoundreturn of 8.50% p.a.?

Showformula,variables,calculation,and aconcluding statementin your response.

c)Explain why there is a difference between the two amounts determined in parts a) and b) above.

d)Calculate the effective interest rate for Nicholas and explain what this number means.

e)Nicholas is now 60 years old. He wants to set up a college fund for his grandchild. He is aiming to be able to pass on $150 000 in 10 years' time. How much does Nicholas need to set aside today into a college fund for his grandchild, assuming the fund earns 7.20% per annum?

Step by Step Solution

3.32 Rating (149 Votes )

There are 3 Steps involved in it

Step: 1

Id be happy to help Nicholas with his financial planning a Monthly contribution at the end of each month To calculate the monthly contribution we can ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting

Authors: Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen

6th Edition

0077185536, 978-0077185534

More Books

Students also viewed these Finance questions