Question 14 Bill and Cathy will be retiring in fifteen years and would like to buy an...

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Finance

Question 14
Bill and Cathy will be retiring in fifteen years and would liketo buy an Italian villa. The villa costs $500,000 today, andhousing prices in Italy are expected to increase by 5.5% per year.Bill and Cathy wants to deposit one lump sum amount today. If theiraccount earns 10% per year, what is the amount of this deposit?
$307,839
$372,623
$286,858
$267,219
Question 15
Susan saved $5000 per year in her retirement account for 10years (during age 25-35) and then quit saving. However, she did notmake any withdrawal until she turned 65 (i.e., 30 years after shestopped saving). Her twin sister, Jane did not save anything duringthe 1st 10 years (during age 25-30) but saved $5,000 per year for30 years (during age 35-65). What will be the difference in theirretirement account balance at age 65, if their investments earnedan average return of 7.5% during the entire period?
$162,450
$102,289
$53,568
$236,265

Answer & Explanation Solved by verified expert

3.5 Ratings (336 Votes)

14 Present Value of the villa PV 500000 Inflation rate i 55 Number of years n 15 Future Value of Villa FV PV1in 5000001005515 111623825 Let the See Answer

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Question 14Bill and Cathy will be retiring in fifteen years and would liketo buy an Italian villa. The villa costs $500,000 today, andhousing prices in Italy are expected to increase by 5.5% per year.Bill and Cathy wants to deposit one lump sum amount today. If theiraccount earns 10% per year, what is the amount of this deposit?$307,839$372,623$286,858$267,219Question 15Susan saved $5000 per year in her retirement account for 10years (during age 25-35) and then quit saving. However, she did notmake any withdrawal until she turned 65 (i.e., 30 years after shestopped saving). Her twin sister, Jane did not save anything duringthe 1st 10 years (during age 25-30) but saved $5,000 per year for30 years (during age 35-65). What will be the difference in theirretirement account balance at age 65, if their investments earnedan average return of 7.5% during the entire period?$162,450$102,289$53,568$236,265