Would anyone know how to solve these finance questions? pv = c/r pv=
Would anyone know how to solve these finance questions?
PV = C/r PV= C/r-g P= D/r-g
1st: Tom is 30 years old today. His salary next year will be $20,000. He forecasts salary growth of 5%/year and plans to retire at 60.
1) If the discount rate is 8%, what is the PV of his future salary receipts?
2) He plans to save 5% of his salary each year and invest it at 8%. Once retired, he plans to spend it evenly over the next 20 yrs. How much will be able to spend?
3) What if the amount spend in retirement grows at 3%/year. What would be the amount withdrawn in the first year?
2nd: You plan to make a series of deposits in an individual retirement account. You will deposit $1,000 today, $2,000 in year 2, and $2,000 in year 5. If you withdraw $1,500 in year 3 and $1,000 in year 7, assuming no withdrawal penalties, how much will you have after 8 years if the interest rate is 7%? What is the present value of these cash flows?