Kelly’s Boutique
Ch 07-04 Solution
Present Value Analysis
Annuity payment required: ($11,925.69) Year Interest Annuity Investment
0 $0.00
Future need: 150,000.00$ 1 $0.00 $11,925.69 $11,925.69
Term (in years): 10 2 $596.28 $11,925.69 $24,447.66
10 $6,574.97 $11,925.69 $150,000.00
Investment value in future: $122,167.10 Year Interest Investment
0 $75,000.00
Current investment: ($75,000.00) 1 $3,750.00 $78,750.00
Interest rate: 5% 2 $3,937.50 $82,687.50
Term (in years): 10 3 $4,134.38 $86,821.88
10 $5,817.48 $122,167.10
Investment value in future: $60,185.22 Year Interest Annuity Investment
0 –$
Current annuity investment: ($4,785.00) 1 $0.00 $4,785.00 4,785.00$
Interest rate: 5% 2 $239.25 $4,785.00 9,809.25$
Term (in years): 10 3 $490.46 $4,785.00 15,084.71$
4 $754.24 $4,785.00 20,623.95$
5 $1,031.20 $4,785.00 26,440.15$
6 $1,322.01 $4,785.00 32,547.15$
7 $1,627.36 $4,785.00 38,959.51$
8 $1,947.98 $4,785.00 45,692.49$
9 $2,284.62 $4,785.00 52,762.11$
10 $2,638.11 $4,785.00 60,185.22$
Invest now: ($125,563.68) Year Interest Investment
0 $125,563.68
Future need: 204,530.00$ 1 $6,278.18 $131,841.86
Interest rate: 5% 2 $6,592.09 $138,433.95
Interest rate: 5% 3 $1,222.38 $11,925.69 $37,595.73
Term (in years): 10 3 $6,921.70 $145,355.65
4 $7,267.78 $152,623.44
5 $7,631.17 $160,254.61
6 $8,012.73 $168,267.34
7 $8,413.37 $176,680.70
8 $8,834.04 $185,514.74
9 $9,275.74 $194,790.48