Time Value of Money

Supplemental TVM Problems Problem TV5-4 (w/growth) Ebincezer Bumpstead has $38,000 in his savings account today. He is hoping to contribute $5,000 annually for each of the next 15 years, with the first of the fifteen annual payments commencing at the end of this year. Assuming that he wishes to withd raw an equal amount of money annually for 10 years, commencingg on the year following the last S5.000 deposit, how much would he be able to withdraw annually and retain a $50,000 balance in his account immediately following the last withdrawal. Assume a reasonably assured annual interest rate of 8%. Assume also that the amount he wishes to withdraw will grow at an annual rate of 4%. All other facts will hold true Problem TV5-5 Kant Rustem, Pension Consultants, Inc. has proposed a unique investment opportunity to you. They suggest that if you invest a stipulated amount with them today. Beginning in the 10th year, they will commence payments, for the next 20 years, thereafter, at the end of each of these years, a stream of income that will grow at a compound annual rate of 4 % , from your initial payment stream of $37,743. Given a fairly reliable return of 8%, what is the sake! unt you must set aside today? You may round off for simplicity mr b000,2 od o oW mo glwoo do el hom 1 o di lono to g dnoa p Siaong t o ligo al d c do didw -Vmdon anu tld d blo n s11(lles e logsb ad te be oo oibabsqes sda