Light sweet petroleum, inc., is trying to evaluate a generation project with cash flows:________.
1 answer:
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Stan is going to work for the next 30 years and then retire. Starting the day he retires, he would like to withdraw $90,000 per year (in monthly installments) from an investment account for a twenty-five year retirement. At the end of his retirement, he would like to leave a bequest of $100,000 to his heirs. He currently has $10,000 in his investment account for these purposes. Stan plans to save for retirement by making monthly deposits into the investment account, beginning two years from now and ending the month before he retires. The investment account pays 9 percent compounded monthly. Construct a flexible spreadsheet model to answer the following questions:
1. How much must Stan invest each month to accomplish his retirement goals?
2. If Stan's employer will contribute $0.50 for every $1.00 he invests, how much of the deposit in #1 will Stan have to contribute?
Answer:
The probability of getting paid more than $6500 in 100 weeks is 0.6%
Explanation:
In this problem, we need to define a probabilty distribution for the money earned.
The 100-week payoff can be expressed as
Being L the numbers of weeks we have low pay and H the weeks we have high pay.
Now, as it is a coin flip, H is a binomial random variable with p=0.5 and n=100
For a total pay off of more than 6500, H has to be
That means that in at least 63 of the 100 weeks we have to get a high pay.
If we compute the individual probabilities we get P(H≥63)=0.006 or 0.6%.