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ch4aika [34]
2 years ago
8

RuthAnn is 28 years old and is retiring at the age of 65. When she retires, she estimates that she will need an annual income of

$32,523 for 30 years. If RuthAnn contributes 11% of her annual income to a 401(k) paying 7.1% compounded annually, will she reach her goal for retirement given that her annual income is $36,278.13? If she does not make her goal then state by what amount she will need to supplement her income. Round all answers to the nearest cent.
Business
1 answer:
inessss [21]2 years ago
6 0

Answer:

Yes

Explanation:

From her current age of 28 to her retirement age of 65, RuthAnn has (65 - 28 =) 37 more years to work.

If she saves 11% of her annual income of $36,278.13 into a 401(k), she will be setting aside (11% * 36,278.13 =) $3,990.59 into the 401(k) account annually.

At 7.1% compounding rate, in 37 years, RuthAnn would have set aside an amount estimated by the future value of an annuity formula.

FV = \frac{A(1+r)^{n} - 1}{r}

where FV is the future value, the amount that would have been set aside,

A = is the annual savings,

r = is the compounding rate, and

n = is the number of years.

Therefore, the total amount that would be saved up after 37 years =

FV = \frac{3,990.59(1+0.071)^{37} - 1}{0.071}

= (3,990.59 * 11.6535)/0.071

= $654,990.31.

By spending $32,523 annually from an account earning 7.1% compound interest rate for 30 years, the present value of the total amount needed by RuthAnn today that will be sufficient for her retirement spending can be estimated using the present value of an annuity formula.

PV = \frac{A(1 - (1+r)^{-n}}{r}

= PV = \frac{32,523(1 - (1.071)^{-30}}{0.071}

= (32523 * 0.8723)/0.071

= $399,574.83.

Since the amount saved up ($654,990.31) is more than the total amount required for RuthAnn's retirement ($399,574.83), RuthAnn has more than sufficient to meet her Retirement goal.

Specifically, the amount she has saved up can support a maximum annual spending which can be estimated from the present value of an annuity formula.

PV = \frac{A(1 - (1+r)^{-n}}{r}

where PV = the amount saved up, $654,990.31,

A = the annual spending which we are estimating,

r = the 7.1% compound interest rate,

n = the number of years to retirement.

654,990.31 = \frac{A(1 - (1.071)^{-30}}{0.071}

= 654,990.31 = (A * 0.8723)/0.071

= A = 654,990.31/0.8723 * 0.071

= A = 53,312.29

Thus, the amount saved up can support a maximum retirement spending of $53,312.29, which is higher than the $32,523 annual income needed by RuthAnn for her retirement.

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Answer and Explanation:

The computation is shown below;

1. The willing amount to pay for the promise should be less than $20 that represents the time value of money

2. Now the present value is

= Received amount × discounting factor at 6% for 3 years

= $1,000 × 0.839

= $839

3. Now the interest rate is

As we know that

Future value = Present value × (1 + rate of interest)^number of years

$1,000 = $863.84 × (1 + rate of interest)^3

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6 0
3 years ago
Suppose your neighbor enjoys seeing the grass in his yard grow wild and free, a practice with which you disagree. This is an exa
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Answer:

negative consumption externality.

Explanation:

A negative externality arises when the production or consumption of a finished product or service has negative impact (cost) on a third party.

On the other hand, a positive externality arises when the production or consumption of a finished product or service has a significant impact or benefits to a third party that isn't directly involved in the transaction.

In this scenario, your neighbor enjoys seeing the grass in his yard grow wild and free, a practice with which you disagree because it poses a danger on the people around as snakes and other poisonous animals may breed or live there.

Hence, this is an example of a negative consumption externality because it's the potential of causing you harm or endangering your life.

6 0
3 years ago
On January 2, 2020, Pull Corp. paid $516,000 for 24% (96,000 shares) of the outstanding common stock of Olivia Co. Pull used the
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Answer:

(a). Journal entry shown below:

(b). Balance in the investment account = $649,167

Explanation:

As per the data given in the question,

A)

Journal entry to record the sale of the 20,000 shares:

Cash A/c Dr. $240,000

(20,000×$12)

Loss on sale of investment A/c Dr. -$69,166.67

($170,833-$240,000)

To Investment in Olivia co. A/c $170,833

($820,000÷96,000×20,000 shares)

(To record the sale of 20,000 shares)

B)

Balance in the investment account in Jan 1 2020 = $820,000

Investment in Oliver Co. sold = $170,833

Balance in the investment account after the sale = $820,000-$170,833

=$649,167

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This text appears and a Canamak's page of the local newspaper.One of the sentences is incorrect. Which corrected sentence would
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Answer: option C.

It corrects the error in the original because when business seek to reduce cost  cut positions not the contrary. The employment goes down which is the same that unemployment goes up.
8 0
3 years ago
Answer the question based on the accompanying list of items related to aggregate demand or aggregate supply. Changes in which co
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Answer:

  1. Government Spending   
  2. Degree of Excess Capacity  
  3. Productivity  
  4. Business Taxes  
  5. Domestic Resource Availability  
  6. Prices of Imported Products

Explanation:

Hello, research into this question makes me believe that this is the list of factors. Hope I am right :)

  1. Government Spending  
  2. Consumer Expectations  
  3. Degree of Excess Capacity  
  4. Personal Income Tax Rates  
  5. Productivity  
  6. National Income Abroad  
  7. Business Taxes  
  8. Domestic Resource Availability  
  9. Prices of Imported Products  
  10. Profit Expectations on Investments

Supply is the amount of goods and services suppliers are willing to provide at a given time for a given price. A shift in the supply curve to the left means that there is a fall in quantity supplied (occurs during unfavorable conditions) whereas a right-hand shift proves that there is an increase in quantity supplied (occurs during favorable conditions) . Factors that can cause a shift in the supply curve are as follows:

1. Government Spending:

If the government increases spending such as in the form of loans or subsidies, suppliers will be positively affected and causes a right-hand shift in the supply curve. However, if government spending falls, it would create a left-hand shift.

2. Degree of Excess Capacity:

This refers to the stock that can be withheld in a business. When there is a lot of excess capacity, there would be a right-hand shift in supply.

3. Productivity:

Higher productivity means that production is high, hence supply is high causing a right shift. On the other hand, lower productivity will create a left-hand shift.

4. Business Taxes:

Businesses are expected to pay taxes such as corporate taxes. When taxes are high, firms are discouraged since a lot of their earnings are paid as tax to the government. Thus supply will fall, leading to a left shift. On the other hand, when taxes are low, businesses are encouraged to produce more since they can now make higher profits. Thus, supply curve shifts to the right.

5. Domestic Resource Availability:

If domestic resources are used in production, such as land, labor or machinery, high availability of these will allow higher production and hence a shift in supply to the right. Lower availability will cause a left hand shift in the supply curve.

6. Prices of Imported Products:

If certain raw materials are important for production, rising prices of imported products will reduce supply as cost of production is higher, which causes supply to shift left. However, when prices of imported products fall, cost of production falls, causing a right hand shift in the supply curve.

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3 years ago
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