Liberty University BUSI352 Quiz 4 Complete Solutions Correct Answers Key

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Liberty UniversityBUSI352quiz4Complete Solutions Correct Answers KeyQuestion 1 In five years, Joe wants to buy a boat that costs $75,000 in today’s dollars. He canearn 8% return on his investments, and he expects the boat to increase in price by 3% each year.What will Joe’s serial payment at the end of the second year be, if he wants to buy the boat in 5years?Question 2 Claire just won the lottery and has been told that she can either accept annualpayments at the beginning of each year of $173,695 per year for the next 20 years or she canreceive a lumpsum settlement. Claire figures she could invest the money at 6.34% (the same rateas the annuity). What would the amount of the lumpsum settlement be?Question 3 CJ is 40 and wants to retire in 25 years. He expects to live until age 95. He currentlyhas a salary of $100,000 and expects that he will need about 75% of that if he were retired. Hethinks he needs to accumulate $1 million (future dollars), and he will be fine. He currently has$150,000 saved for his retirement that is earning 9%. He is able to save $20,000 towards hisretirement. However, he is willing to use some or all of this to fund education for his grandchild,Bob, if and when his retirement objective appears to be set in terms of funding. Edward, Bob’sdad and CJ’s son, wants Bob to go to school for six years and expects that it will cost $50,000 peryear in today’s dollars. Inflation has been modest at 3%, while education has been increasing at 6%per year. Edward would like to know how much he should save every year to fund Bob’s collegeexpenses assuming that he can max out his dad’s (CJ) contribution, which would begin in oneyear and stop when Bob goes to school. Edward would also begin contributing in one year andstop when Bob goes to school and wants to assume he can earn 9% per year. How much doesEdward need to save each year? (round to nearest $1,000)Question 4 Cindy won the California lottery. She can take a single lumpsum payout of $12.5million dollars or receive $825,000 per year for the next 25 years. What rate of return would Cindyneed to break even if she took the lumpsum amount instead of the annuity?Question5Steveandhiswife,Christine,recentlyopenedaninvestmentaccountwiththeintention of savingenoughto purchaseahouse.Theirgoal isto have$45,000for adownpayment in 5 years. Their account will guarantee them a return of 8% compounded annually. Howmuch do they need to put into the account right now to reach their goal?Question6TanandChiaarecontemplatingmakingacontributiontotheirgrandchildren’s

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