# Retirement savingsA couple thinking about retirement decides to put aside $3,000 each year in a savings plan that earns 8% interest. In 5 years, they will receive a gift of$10,000 that also can be invested.a. How much money will they have accumulated 30 years from now?b. If the goal is to retire with $800,000 savings, how much extra do they need to save every year? ## Answers Answer 1 Answer: Answer: a.$408,334.39

b. $3,457.40 Explanation: r = rate per period = 8% = 0.08 P = Initial Value of Gift =$10,000

t = time = 30 - 5 = 25, As received after 5 years.

A = $10,000 x 6.8485 A =$68,484.75

P = Periodic Payment = $3,000 a. n = number of periods = 30 FV of annuity =$3,000 x 113.2832

FV of annuity = $339,849.63 Accumulated value of money can be calculated as follows;$68,484.75 + $339,849.63$408,334.39

b.

If they wish to retire with $800,000 savings, they need to save additional amount of money every year to provide additional amount of money, as follows;$800,000 - $68,484.75$731,515.24

The extra annual savings can be calculated as follows;

$731,515.24 = P x 113.28 Divide the above equation by 113.28 we get; P =$6,457.40

They are already paying $3,000, So the extra saving they need make every year is calculated as follows;$6,457.40 - $3,000$3,457.40

## Related Questions

Price gouging is _____ a. irrational behavior that violates economic logic. b. a natural response to a sudden increase in demand. c. not subject to economic analysis, because it is illegal. d. a precisely defined concept that leaves no room for dispute or disagreement.

b. a natural response to a sudden increase in demand.

Explanation:

Price gouging -

It refers to the situation , when the seller increases the price of his services and goods to a very high level , which is a unethical situation , is referred to as price gouging .

The situation of price gouging , is very commonly observed in any natural disaster , where due to shortage of foods and other item , the price of the food increases to a very high price , is referred to as price gouging .

Hence , from the question,

The correct option is b.

who bears the greatest risk of loss of value if a firm should fail? group of answer choices bondholders common stockholders all of the above bear equal risk of loss. preferred stockholders

Common stockholders bear the greatest risk of loss of value if a firm should fail.

There are two sorts of shareholders in a company: common shareholders and preferred shareholders. They are the owners of common stocks, as their name implies, in a corporation. These individuals enjoy voting rights over matters concerning the company.

A person who has acquired at least one common share of a corporation is referred to as a common shareholder. Common shareholders have entitled to declared common dividends as well as a vote on corporate matters. In the event of bankruptcy, common shareholders are compensated last, following preferred shareholders and debtholders.

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Consider the following abbreviated financial statements for Cabo Wabo, Inc.: CABO WABO, INC. Partial Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019 Assets Liabilities and Owners’ Equity Current assets $3,151$ 3,367 Current liabilities $1,399$ 2,078 Net fixed assets 14,060 14,511 Long-term debt 7,377 8,419 CABO WABO, INC. 2019 Income Statement Sales $45,000 Costs 22,522 Depreciation 3,885 Interest paid 995 a. What is owners’ equity for 2018 and 2019? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) b. What is the change in net working capital for 2019? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. In 2019, the company purchased$8,038 in new fixed assets. The tax rate is 23 percent. How much in fixed assets did the company sell? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. What is the cash flow from assets for the year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d-1. During 2019, the company raised $2,479 in new long-term debt. What is the cash flow to creditors? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d-2. How much long-term debt must the company have paid off during the year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) ### Answers Answer: a. What is owners’ equity for 2018 and 2019? owners' equity 2018 =$8,435

owners' equity 2019 = $7,381 b. What is the change in net working capital for 2019? -$463

c-1. In 2019, the company purchased $8,038 in new fixed assets. The tax rate is 23 percent. How much in fixed assets did the company sell? net capital spending =$14,511 - $14,060 +$3,885 = $4,336 net capital spending = fixed assets purchased - sold$4,336 = $8,038 - fixed assets sold fixed assets sold =$3,702

c-2. What is the cash flow from assets for the year?

operating cash flow = EBIT + depreciation - taxes = $18,593 +$3,885 -  $4,276 =$18,202

cash flow from assets = operating cash flow - change in net working capital - net capital spending = $18,202 - (-$463) - $4,336 =$14,329

d-1. During 2019, the company raised $2,479 in new long-term debt. What is the cash flow to creditors? new long term debts =$8,419 (2019) - $7,377 (2018) =$1,042

cash flow form creditors = new long term debts - interests = $1,042 -$995 = $47 d-2. How much long-term debt must the company have paid off during the year? new long term debts = new debt - retired debt$1,042 = $2,479 - retired debt retired debt =$2,479 - $1,042 =$1,437

a)The owners' equity for 2018 and 2019 is $8,435 and$7,381. b) The change in net working capital for 2019 is $463. c-1) The fix assets sell are$3,702, c2-The cash flow from assets for the year is $14,329. d-1)The cash flow to creditors is$47 and d-2)The long-term debt that the company must have paid off during the year is $1,437. a)owners' equity 2018 =$8,435 owners' equity 2019 = $7,381 b. The change in net working capital for 2019 is$463

c-1. The company purchased $8,038 in new fixed assets. The tax rate Is 23 percent. The fixed assets sold are: net capital spending$14,511 $14,060+$3,885-$4,336 net capital spending = fixed assets purchased-sold$4,336 $8,038-fixed assets sold fixed assets sold =$3,702

c-2. The cash flow from assets for the year is:

operating cash flow - EBIT + depreciation-taxes = $18,593 +$3,885- $4,276$18,202

cash flow from assets = operating cash flow-change in net working capital- net capital spending $18,202 (-$463)-$4,336$14,329

d-1. During 2019, the company raised $2,479 in new long-term debt. The cash flow to creditors is: new long term debts =$8,419 (2019) - $7,377 (2018) =$1,042 cash flow form creditors = new long term debts interests $1,042 -$995 = $47 d-2. The long-term debt that the company must have paid off during the year is: new long term debts = new debt-retired debt$1,042 $2,479 - retired debt retired debt =$2,479 - $1,042 =$1,437

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A put and a call have the following terms: Call: strike price $50 expiration date six months Put: strike price$50 expiration date six months The price of the stock is currently $55. The price of the call and put are, respectively,$9 and $1. What will be the profit from buying the call or buying the put if, after six months, the price of the stock is$40, $50, or$60?

* Profit from buying the call with strike price of $50 after six months if: - The stock price is$40: -$9 - The stock price is$50: -$9 - The stock price is$60: $1 * Profit from buying the put with strike price of$50 after six months if:

- The stock price is $40:$9

- The stock price is $50: -$1

- The stock price is $60: -$1

Explanation:

It is useful to recall that the call's buyer has the right but not the obligation to buy an underlying asset at strike price at expiration date; while the put's buyer has the right but not the obligation to sell an underlying asset at strike price at expiration date.

Explanation for each circumstances:

*Profit from buying the call with strike price of $50 after six months if: - The stock price is$40: Do not exercise the call option as investor can buy from the market at $40 instead at the strike price of$50. Thus, investor will recognize a loss of $9 from buying the option. - The stock price is$50: Market price is equal to strike price, investor will recognize a loss of $9 from buying the option. - The stock price is$60: $1. Investor buy at strike price$50, sell in the market for $60 to get profit of$10, minus option price of $9, net gain is$1.

* Profit from buying the put with strike price of $50 after six months if: - The stock price is$40: Investor buy from market at $40, sell through put option at$50, recognized the profit of $10. Net gain will be determined by further deducting of option price$1, to come at $9. - The stock price is$50: Market price is equal to strike price, investor will recognize a loss of $1 from buying the option. - The stock price is$60: Investor ignore the option as it can sell at market price of $60 instead of strike price$50. Net loss is option price $1. Which of the following is an example of the free-rider problem? a. Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. b. Alfred receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Alice, is not eligible for the free lunch. c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. d. Sam purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale. ### Answers Answer: c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking Explanation: Free rider is a form of market inefficiency that occurs when people benefit from a good or service but do not pay or underpay for the product. Betty is receiving free protection from Bruce's dog. I hope my answer helps you Answer: Which of the following is an example of the free-rider problem? Option C is the most suitable answer - Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. Explanation: In a situation whereby one party benefits without having to pay for the transaction themselves, and rather the other party pays for it, there would be an occurrence of the free-riding problem. In the scenario described in the question, the neighbor is receiving benefits from burglars without having to pay for the security or dog. Therefore, option C is the most suitable answer. On May 1, 2016, Varga Tech Services signed a$6,000 consulting contract with Shaffer Holdings. The contract requires Varga to provide computer technology support services whenever requested over the period from May 1, 2016, to April 30, 2017, with Shaffer paying the entire $6,000 on May 1, 2016.How much revenue should Varga recognize in 2016? (Do not round intermediate calculation.) ### Answers Answer: Varga should recognize$4,000 as revenue in 2016.

Explanation:

As the cash received in advance is recorded as unearned revenue which is a liability for the Varga Tech Services because they did not provide the services yet. On  December 31,  Eight months have passed and services for these month has been provided. So the revenue of 8 month months of 2016 will be recognized and recorded at year end.

Serive Contract = $6,000 for 12 months Revenue Recognized in 2016 =$6,000 x 8/12 = \$4,000