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lisabon 2012 [21]
2 years ago
5

You estimate that by the time you retire in 35 years, you will have accumulated savings of $2 million. If the interest rate is 8

% and you live 15 years after retirement, what annual level of expenditure will those savings support?
Business
1 answer:
lbvjy [14]2 years ago
5 0

Answer:

We can use the present value of an annuity formula to determine the annual distribution. I'm assuming that your distributions will be made in a similar manner to an annuity due (the first payment happens when you retire).

annual distribution = principal balance / PV annuity factor

  • principal balance = $2,000,000
  • PV factor annuity due, 8%, 15 periods = 9.24424

annual distribution = $2,000,000 / 9.24424 = $216,350.94

if instead, the first distribution is received at the end of the first year of retirement, then the annual distribution will be:

annual distribution = principal balance / PV annuity factor

  • principal balance = $2,000,000
  • PV factor ordinary annuity, 8%, 15 periods = 8.55948

annual distribution = $2,000,000 / 8.55948 = $233,659.05

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3 0
1 year ago
An organization's climate is most likely to be shaped by the: (CSLO 1, CSLO 2) A. degree to which people feel valued. B. level o
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Answer:

A. degree to which people feel valued

Explanation:

The degree to which people feel valued is the answer that most closely determines or shapes an organization's climate.

If people feel valued in an organization, the general climate of it will be more positive, because workers will likely feel happy to work there.

The opposite happens if people do not feel valued: the climate of the organization will probably be negative.

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3 years ago
The expected return and standard deviation of a portfolio that is 30 percent invested in 3 Doors, Inc., and 70 percent invested
kirill115 [55]

Answer:

For correlation 1 the standard deviation of portfolio is 0.433.

For correlation 0 the standard deviation of portfolio is 0.3191.

For correlation -1 the standard deviation of portfolio is 0.127.

Explanation:

The standard deviation of a portfolio is computed using the formula:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}

(1)

For <em>r</em> = + 1 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times1\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.187489}\\=0.433

Thus, for correlation 1 the standard deviation of portfolio is 0.433.

(2)

For <em>r</em> = 0 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times0\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.101809}\\=0.3191

Thus, for correlation 0 the standard deviation of portfolio is 0.3191.

(3)

For <em>r</em> = -1 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times-1\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.016129}\\=0.127

Thus, for correlation -1 the standard deviation of portfolio is 0.127.

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Answer:

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Answer:

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