Question

Continuing Case 5. Time Value of Money A. Jamie Lee needs to save a total of $9,000 in order to get started in her cupcake café venture. She is presently depositing $1,800 a year in a regular savings account. Calculate the future value of these deposits. B. Assuming that she leaves her emergency fund of $3,100 untouched, how much will her emergency fund be worth? C. What if Jamie Lee had a relative that could give her money now that she could invest? What is the minimum amount she would need now to ensure that she had $9,000 when she wanted to open the cupcake café? D. As Jamie Lee is planning ahead for operating the cupcake café, she calculates that she will need $24,000 per year in salary. What is the value of five years of salary when the cupcake café opens? (Assume that she will take the salary as a one-time payment each year.) Use the table below and Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, and Exhibit 1-D to calculate the balances of the information provided above. Assume that the time period for each scenario is 5 years, and the interest rate is 2%. Use the table below and Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, and Exhibit 1-D to calculate the balances of the information provided above. Assume that the time period for each scenario is 5 years, and the interest rate is 2%. A. Future Value of a Series of Deposits Regular deposit amount times Future value of annuity factor equals Future value amount $ 0.00 B. Future Value of a Single Amount Current amount times Future value factor equals Future value amount $ 0.00 C. Present Value of a Single Amount Future amount desired times Present value factor equals Present value amount $ 0.00 D. Present Value of a Series of Deposits Regular amount to be withdrawn times Present value of annuity factor equals Present value amount $ 0.00

Answer 1

To address Jamie Lee's financial planning questions, we use time value of money principles to calculate the future value of regular deposits and a single amount, and the present value of a single amount and series of deposits, all assuming a 2% interest rate over five years.

Step-by-step explanation:

The student needs to understand the concepts of future value, present value, and time value of money to answer the schoolwork questions related to Jamie Lee's savings and investment plan for her cupcake café venture. We will address these questions step by step, employing the formulas for future value of a series of deposits, future value of a single amount, present value of a single amount, and present value of a series of deposits, all considering a 2% interest rate over a 5-year period.

A. Future Value of a Series of Deposits

To calculate the future value of annual deposits of $1,800, the formula would be:

Future value of annuity factor × $1,800

(Exact factor from the table not provided)

B. Future Value of a Single Amount

The future value of Jamie's emergency fund of $3,100 after 5 years at a 2% annual interest rate can be calculated using the formula:

Future value factor × $3,100

(Again, the factor must be taken from the provided table)

C. Present Value of a Single Amount

To find out how much Jamie would need now to ensure she has $9,000 in the future, we use the present value formula:

Present value factor × $9,000

(The present value factor is derived from the table for a 2% rate over 5 years)

D. Present Value of a Series of Deposits

For calculating the present value of 5 years of salary totaling $24,000 per year at the opening of the cafe, the formula would be:

Present value of annuity factor × annual salary

(The factor is to be determined from the table provided)

Answer 2

The question pertains to the time value of money calculations for Jamie Lee's cupcake café venture involving future and present values of single amounts and series of deposits at a 2% interest rate.

Step-by-step explanation:

The subject question is related to the time value of money, which is a fundamental concept in finance that describes how the value of money changes over time due to potential interest earnings.

Helping Jamie Lee with her financial planning for her cupcake café venture involves multiple time value of money calculations such as the future value of a series of deposits, the future value of a single amount, the present value of a single amount, and the present value of a series of withdrawals.

Since the question mentions a regular savings account, future value factor, present value factor, annuities, and an interest rate of 2%, we would apply the relevant financial formulas to calculate each scenario outlined in the question.

For instance, to calculate the future value of Jamie Lee's annual deposits, the formula future value of annuity factor is used in conjunction with the regular deposit amount. Similarly, the emergency fund's worth in the future is determined using the future value factor multiplied by the current amount.

If a relative could give her money now to invest, we would calculate the present value needed to ensure she has $9,000 in the future using the present value factor. Lastly, to understand the value of five years of salary required when the café opens, the present value of annuity factor will be used against the annual salary she plans to withdraw.