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pochemuha
3 years ago
5

James Perkins wants to have a million dollars at retirement, which is 15 years away. He already has $200,000 in an IRA earning 8

percent annually. How much does he need to save each year, beginning at the end of this year, to reach his target
Business
1 answer:
Lelu [443]3 years ago
4 0

Solution :

Given :

James needs $ 1,000,000 after 15 years.

His IRA deposit is $ 200,000 and is earning at the rate of 8% per annum.

Maturity value of $200,000 after 15 years = 2000000 \times( 1.08)^{15}

                                                                     = $ 634,434.

Balance fund needed after 15 years = 1,000,000 - 634,434

                                                           = $ 365,566

Therefore, the future value of the annuity is :

FV=A[\frac{(1+k)^n-1}{k}]

Here, FV = future annuity value = 365,566

            A = periodical investment

            k = interest rate = 8%

            n = period = 15 years

∴365566 = A\frac{[(1.08)^{15}-1]}{0.08}

       A = 13,464

Thus, James needs to save $ 13,464 each year end to reach his target.

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8 0
1 year ago
Annapolis Company has two service departments (Computer Operations &amp; Maintenance Services). Annapolis has two production dep
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Answer:

$56,900

Explanation:

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Cost allocation                                

(Maintenance)                                                56900          91041

Total                                                                98077         156923

Workings.

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Maintenance department = 4/17*140000 =32941

Mixing department = 5/17*140000 =41177

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Maintenance department cost allocation

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3 years ago
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Saving refers to keeping some funds aside for use during emergencies. Individuals and institutions also save as a way of accumulating funds for a specific intention. Banks and other deposit-taking institutions offer saving services to pool funds and lend them for investment and consumption.

Saving will attract lower interest rates, sometimes below the inflation rate. Banks offer lower rates on saving and charges a higher interest rate to borrowers to make profits. Because saving offer lower returns, they are suitable for short-term periods. Savings are relatively safer than investment.

Investments offer higher returns but have a higher risk. Due to their price volatility, investments are suited for the long-term to safeguard against price fluctuations.

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