Question
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?
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