Chapter 5, Solutions Cornett, Adair, and Nofsinger

LG9 retirement wealth that, if invested at 8 percent per year, will provide her with $3,500 of monthly income for 30 years. To date, she has saved nothing, but she still has 25 years until she retires. How much money does she need to contribute per month to reach her goal?

First, calculate the amount you would need to have in 25 years time to yield the $3,500 monthly payments for an additional 30 years. Use equation 5-4 to calculate this present value:

This amount will become the future value in the next calculation, assuming 8% interest and 300 level monthly payments. Use equation 5-2 and solve for the monthly payment:

LG45-46 Investing for Retirement Ross has decided that he wants to build enough retirement

LG9 wealth that, if invested at 7 percent per year, will provide him with $4,000 of monthly income for 30 years. To date, he has saved nothing, but he still has 20 years until he retires. How much money does he need to contribute per month to reach his goal?

First, calculate the amount you would need to have in 20 years time to yield the $4,000 monthly payments for an additional 30 years. Use equation 5-4 to calculate this present value:

This amount will become the future value in the next calculation, assuming 7% interest and 240 level monthly payments. Use equation 5-2 and solve for the monthly payment:

LG95-47 Loan Balance Rachel purchased a $15,000 car two years ago using an 8 percent, 4-year loan. He has decided that he would sell the car now, if he could get a price that would pay off the balance of his loan. What is the minimum price Rachel would need to receive for his car?

First calculate the monthly payment that she has been paying using equation 5-9: