Time Value of Money: Problem Set #2 As a savings plan, Kevin is going to shove $500 per vear under his mattress for 20 years, like an idiot a. How much would he have at the end of 20 years? 500X20-1000 b. If instead Kevin were to save in an interest-bearine account, would you expect the ending balance to be lower higher or the same as in la? (do not use a calculator d rue . Colectro acos c. With 5% interest earned, what would his balance be after 20 vears26 1 4 2 AZ Periat PMT 2. Kareem is wondering how many years it will take him to accumulate $50,000 for a house down payment. He can save $1,200 per year. a. How many years will it take, if Kareem saves the money under his mattress? 1 0 b. Do you think it will take longer, shorter or the same amount of time, if instead he uses an account that earns some interest? (do not use a calculator) C With 4% annual interest, how many years will it take Kareem to achieve his goal? 3. Janai, a 23-year-old who just got her first full time job out of college and is already getting all sorts of good ideas, wants to be a millionaire by the time she retires at 67. (You go, girl!) She is wondering how much she needs to save per year in order to achieve this goal. a. How much does she need to save, if she saves in a non-interest-bearing account? b. If the account yielded some interest, will she need to save less, more or the same amount annually? (do not use a calculator) c. With an interest rate of 6% in the account, how much does she need to save annually? d. If Janai did not get to her retirement saving right away after college and instead waited a few years, would she have to save less, more or the same amount of money per year to reach her goal? (do not use a calculator e. If Janai waited 10 years to start her retirement savings program, how much would she have to save per year in the same 6% yielding account, in order to accomplish her goal? Present value PV Payment Future value FV Annual rate Periods / years