Part (a) Compute the amount that a $20,000 investment today would accumulate at 9% (compound interest) by the end of 8 years.
Part (b) Giles wants to retire at the end of 2016. His life expectancy is 20 years from his retirement. Giles has come to you, his CPA, to learn how much he should deposit on December 31, 2016 to be able to withdraw $55,000 at the end of each year for the next 20 years, assuming the amount on deposit will earn 7% interest annually.
Part (c) Willow has $1,800 overdue debt at UC Sunnydale’s bookstore. She has only $600 in her checking account and doesn't want her parents to know about this debt. The bookstore tells her that she may settle the account in one of two ways since she can't pay it all now: 1. Pay $600 now and $1,600 when she completes her program, two years from today. 2. Pay $2,500 one year after completion of her program, three years from today. Assuming that the cost of money is the only factor in Willow's decision and that the cost of money to her is 8%, which alternative should she choose? Your answer must be supported with calculations.