Time Value of Money

Provide a 4-5 page report, addressing each of the following issues separately. You are to show all your calculations and provide a detailed explanation for each issue. I require a 

completed

 report no later than 10am, Central Daylight Time on Monday, October 21, 2013. This report must be original, no copies, free of grammatical errors and in APA. .Attached are the details of this report.

Assignment 2: LASA 1—The Time Value of Money

By Wednesday, October 23, 2013 submit a 4-5 page report based on the following problem:
 
Mary has been working for a university for almost 25 years and is now approaching retirement. She wants to address several financial issues before her retirement and has asked you to help her resolve the situations below. Her assignment to you is to provide a 4-5 page report, addressing each of the following issues separately. You are to show all your calculations and provide a detailed explanation for each issue.

Issue A:
For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per year, compounded annually and is expected to continue paying that amount. Mary will make one more $500 deposit one year from today. If Mary closes the account right after she makes the last deposit, how much will this account be worth at that time?

Issue B:
Mary has been working at the university for 25 years, with an excellent record of service. As a result, the board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year for 20 years, starting one year from her retirement date and each year for 19 years after that date. Mary would prefer a one-time payment the day after she retires. What would this amount be if the appropriate interest rate is 7%?
Issue C:
Mary’s replacement is unexpectedly hired away by another school, and Mary is asked to stay in her position for another three years. The board assumes the bonus should stay the same, but Mary knows the present value of her bonus will change. What would be the present value of her deferred annuity?

Issue D:
Mary wants to help pay for her granddaughter Beth’s education. She has decided to pay for half of the tuition costs at State University, which are now $11,000 per year. Tuition is expected to increase at a rate of 7% per year into the foreseeable future. Beth just had her 12th birthday. Beth plans to start college on her 18th birthday and finish in four years. Mary will make a deposit today and continue making deposits each year until Beth starts college. The account will earn 4% interest, compounded annually. How much must Mary’s deposits be each year in order to pay half of Beth’s tuition at the beginning of each school each year?

Turn in your completed work to the M3: Assignment 2 Dropbox by Wednesday, October 23, 2013.

32

32

Assignment 2 Grading Criteria	Maximum Points
Calculated the compounded interest over 20 years and evaluated the value of the savings account upon closing. (CO 1)			32
Calculated the bonus payout over 20 years vs. a one time payout with interest and distinguished which bonus option would be better for the client. (CO 1)
Calculated the present value of the bonus and analyzed the difference in bonus for the client. (CO 2)
Analyzed the tuition costs for the client and determined what the future costs will be and determined how these funds can be accumulated over time. (CO 4)	60
Written Components: Organization, usage and mechanics, APA elements, style	44
Total:	200

Assignment 2: LASA 1
—
The Time Value of Money

By

Wednesday, October 23, 2013

submit a 4
–
5 page report based on the following problem:

Mary has been working for a university for almost 25 years and is now approaching retirement. She wants
to address several financial issues before her retirement and has asked you to help her resolve the
situations below. Her assignment to you is to provid
e a 4
–
5 page report, addressing each of the following
issues separately. You are to show all your calculations and provide a detailed explanation for each
issue.

Issue A:

For the last 19 years, Mary has been depositing $500 in her savings account , which h
as earned 5% per
year, compounded annually and is expected to continue paying that amount. Mary will make one more
$500 deposit one year from today. If Mary closes the account right after she makes the last deposit, how
much will this account be worth at t
hat time?

Issue B:

Mary has been working at the university for 25 years, with an excellent record of service. As a result, the
board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year
for 20 years, starting one

year from her retirement date and each year for 19 years after that date. Mary
would prefer a one
–
time payment the day after she retires. What would this amount be if the appropriate
interest rate is 7%?

Issue C:

Mary’s

replacement is unexpectedly hired
away by another school, and Mary is asked to stay in her
position for another three years. The board assumes the bonus should stay the same, but Mary knows
the present value of her bonus will change. What would be the present value of her deferred annuity?

Issue D:

Mary wants to help pay for her granddaughter Beth’s education. She has decided to pay for half of the
tuition costs at State University, which are now $11,000 per year. Tuition is expected to increase at a rate
of 7% per year into the foreseeable

future. Beth just had her 12th birthday. Beth plans to start college on
her 18th birthday and finish in four years. Mary will make a deposit today and continue making deposits
each year until Beth starts college. The account will earn 4% interest, compoun
ded annually. How much
must Mary’s deposits be each year in order to pay half of Beth’s tuition at the beginning of each school
each year?

Turn in your completed work to the

M3: Assignment 2 Dropbox

by

Wednesday, October 23, 2013
.

Assignment 2 Grading C
riteria

Maximum
Points

Calculated the compounded interest over 20 years
and evaluated the value of the savings account
upon closing. (CO 1)

32

Calculated the bonus payout over 20 years vs. a
one time payout with interest and distinguished
which bonus option would be better for the client.
(CO 1)

32

Calculated the present value of the bonus and
analyzed the difference in bonus for the client.

(CO
2)

32

Analyzed the tuition costs for the client and
determined what the future costs will be and
60

Assignment 2: LASA 1—The Time Value of Money
By Wednesday, October 23, 2013 submit a 4-5 page report based on the following problem:

Mary has been working for a university for almost 25 years and is now approaching retirement. She wants
to address several financial issues before her retirement and has asked you to help her resolve the
situations below. Her assignment to you is to provide a 4-5 page report, addressing each of the following
issues separately. You are to show all your calculations and provide a detailed explanation for each
issue.
Issue A:
For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per
year, compounded annually and is expected to continue paying that amount. Mary will make one more
$500 deposit one year from today. If Mary closes the account right after she makes the last deposit, how
much will this account be worth at that time?
Issue B:
Mary has been working at the university for 25 years, with an excellent record of service. As a result, the
board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year
for 20 years, starting one year from her retirement date and each year for 19 years after that date. Mary
would prefer a one-time payment the day after she retires. What would this amount be if the appropriate
interest rate is 7%?

Issue C:
Mary’s replacement is unexpectedly hired away by another school, and Mary is asked to stay in her
position for another three years. The board assumes the bonus should stay the same, but Mary knows
the present value of her bonus will change. What would be the present value of her deferred annuity?
Issue D:
Mary wants to help pay for her granddaughter Beth’s education. She has decided to pay for half of the
tuition costs at State University, which are now $11,000 per year. Tuition is expected to increase at a rate
of 7% per year into the foreseeable future. Beth just had her 12th birthday. Beth plans to start college on
her 18th birthday and finish in four years. Mary will make a deposit today and continue making deposits
each year until Beth starts college. The account will earn 4% interest, compounded annually. How much
must Mary’s deposits be each year in order to pay half of Beth’s tuition at the beginning of each school
each year?
Turn in your completed work to the M3: Assignment 2 Dropbox by Wednesday, October 23, 2013.
Assignment 2 Grading Criteria
Maximum
Points
Calculated the compounded interest over 20 years
and evaluated the value of the savings account
upon closing. (CO 1)
32
Calculated the bonus payout over 20 years vs. a
one time payout with interest and distinguished
which bonus option would be better for the client.
(CO 1)
32
Calculated the present value of the bonus and
analyzed the difference in bonus for the client. (CO
2)
32
Analyzed the tuition costs for the client and
determined what the future costs will be and
60