Decision 1
Question 1RATE4%Option APV$10,000
Option BNPER10yearsPMT$1,600PV$12,977.43
Option CFV$20,000.00PV$13,511.28HIGHEST PRESENT VALUE
Financial theory supports choosing Option C
Question 2RATE7%Option APV$10,000
Option BNPER10yearsPMT$1,600PV$11,237.73HIGHEST PRESENT
VALUE
Option CFV$20,000.00PV$10,166.99
Financial theory supports choosing Option B
Question 3RATE10%Option APV$10,000HIGHEST PRESENT VALUE
Option BNPER10yearsPMT$1,600PV$9,831.31
Option CFV$20,000.00PV$7,710.87
Financial theory supports choosing Option A
Decision 2
Answer a:Future value on doing nothing for the next 10 years,
then puts $2400 per year away for the remaining 35
years$413,560.33PMT$2,400NPER35RATE8%FV (1)$413,560.33
Answer b:Future value if they put $2400 per year away for the
next 10 years, then puts nothing additional away for the remaining
35 years$514,053.15PMT$2,400NPER10RATE8%FV at 10th
years$34,767.75FV at after 45 years (2)$514,053.15
Answer c:Future value if they put $2400 per year away for each
of the next 45 years$927,613.48FV = FV(1)+FV(2)$927,613.48Answer
d:FV$925,000NPER20RATE8%PMT$18,716.01
If Tom and Tricia wait 25 years (after the kids are raised!)
before they put anything away for retirement, they should put $
18,716 each year for 20 years in order to have $925,000 saved up on
the first day of their retirement 45 years from today
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