5.1 Calculating Future Values Go to www.dinkytown.net
and follow the "Savings Calculator" link. If you currently have $10,000
and invest this money at 9 percent, how much will you have in 30 years? Assume
you will not make any additional contributions. How much will you have if you
can earn 11 percent? 5.2 Calculating the Number of Periods Go to www.dinkytown.net
and follow the "Cool Million" link. You want to be a millionaire.
You can earn 11.5 percent per year. Using your current age, at what age will
you become a millionaire if you have $25,000 to invest, assuming you make no
other deposits (ignore inflation)? 5.3 Calculating the Number of Periods Cigna has a
financial calculator available at www.cigna.com. To get to the calculator, follow
the "Calculator &; Tools" link, then the "Present/Future Value
Calculator" link. You want to buy a Lamborghini Diablo VTTT. The current
market price of the car is $330,000 and you have $33,000. If you can earn an
11 percent return, how many years until you can buy this car (assuming the price
stays the same)? 5.4 Calculating Rates of Return Use the Cigna financial
calculator to solve the following problem. You still want to buy the Lamborghini
VTTT, but you have $50,000 to deposit and want to buy the car in 15 years. What
interest rate do you have to earn to accomplish this (assuming the price stays
the same)? 5.5 Future Values and Taxes Taxes can greatly affect
the future value of your investment. The Financial Calculators web site at www.fincalc.com
has a financial calculator that adjusts your return for taxes. Follow the "Projected
Savings" link on this page to find this calculator. Suppose you have $50,000
to invest today. If you can earn a 12 percent return and no additional annual
savings, how much will you have in 20 years? (Enter 0 percent as the tax rate.)
Now, assume that your marginal tax rate is 27.5 percent. How much will you have
at this tax rate? |