BUS 650 Week 2 DQ 1 Initial Investment

BUS 650 Week 2 DQ 1 Initial Investment

BUS 650 Week 2 DQ 1 Initial Investment

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After reading Chapters 3 and 4 of your textbook, address each of the
following
questions:
a) Think of something you want or need for which you currently do not
have the funds. It could be a vehicle, boat, horse, jewelry, property,
vacation, college fund, retirement money, etc. Select something which
costs somewhere between $2,000 and $50,000. Use the “Present Value
Formula”, which computes how much money you need to start with now
to achieve the desired monetary goal. Assume you will find an
investment that promises somewhere between 5% and 10% interest on
your money (you choose the rate) and pretend you want to purchase
your desired item in 12 years. (Remember that the higher the return,
usually the riskier the investment, so think carefully before deciding on
the interest rate.) How much do you need to invest today to reach that
desired amount 12 years from now?
b) You wish to leave an endowment for your heirs that goes into effect 50
years from today. You don’t want to be forgotten after you pass so you
wish to leave an endowment that will pay for a grand soirée yearly and
forever. What amount would you like spent yearly to fund this grand
party? How much money do you have to leave to your heirs 50 years

from now assuming that will compound at 6% interest? Assuming that
you have not invested anything today, how much would you have to
invest yearly to fully fund the annuity in 50 years, again assuming a 6%
monthly compounding rate?

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