Initial InvestmentAfter reading Chapters 3 and 4 of your textbook, address each of the following questions:* Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000. Use the “Present Value Formula”, which computes how much money you need to start with now to achieve the desired monetary goal. Assume you will find an investment that promises somewhere between 5% and 10% interest on your money (you choose the rate) and pretend you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.) How much do you need to invest today to reach that desired amount 12 years from now?* You wish to leave an endowment for your heirs that goes into effect 50 years from today. You don’t want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?Guided Response: Review several of your classmates’ postings. Examine calculations and reply to at least two of your classmates’ posts by adding recommendations to extend their thinking or posing questions to help them consider components they may have missed.———————————1. Tashardna.VVS stone diamonds are beautiful and that’s something would like to invest in. So far I’ve put aside $300. Present value is a formula that is used to calculate present day value on a amount that will be received at a different time. There is a time value of money, the PV formula has so much uses and can be utilized in many areas of finance like banking, investment, as well as cooperate. Beyond that, the different areas of finance that PV analysis utilized is also used as a component for other financial formulas. If I were to save $400 every month for the next 12 months with 5% interest I would gain $3,545.30 in 24 months. The future value would than be 6,365.85 with the Interest rate being $1,566.85. To purchase something in 144 months (12yrs), by year 1 I would be 110, in Year 2 it would be 131. $100 saved every month for 10 years with 6% interest would equal to $15,000. $6,000 would be the initial value. The amount of years would be 4, therefore, 48 months with 6% the final value would be $49,181.62. I used the compound annual growth formula in order to reach these results ReferencePresent Value Formula. Retreived from https://financeformulas.net/Present_Value.html———————-2. Rebekah.Investment Investing in the future can allow for the desired item that by spending a bit now and letting it ride over time one can have the funds. I want to invest money to fund a trip to Europe. I have estimates that I will need about 10,000 and plan to go in 12 years. I have found an investment that is lower risk and has an interest rate that is relatively low of 5%. I will start this year with my annual bonus after taxes, which comes to $5,568.37. By using the present value formula of the desired return of $10,000/(1+0.05)12(Byrd, Hickman, & McPherson, 2013). Also, since the investment has a long time to reach maturity, it seems a good decision to use one that has a lower risk. If one was to take a trip or need the funds sooner, it would be advisable to find a higher rate, although then it would have added risk for the returns.Legacy Party and Funds for Heirs Annuities can be linked to long-term funding and used to assess the support one could provide for family years after death. In the example, one wants to have a party annually in remembrance of their life. The plan is to start in nearly 50 years from now and to have enough funds to have an impressive party annually, which I estimate will cost about $20,000 per year and should take place for about 50 years to span the lives of those that knew me. To have the funds for the party with the duration of 50 years I would need to have the base of $360,000 in the annuity for the funds with the 6% interest rate to last for 50 years. However, thus far nothing has been invested so now I would need to assess how much I need to add each year the amount of $1,300 as a rounded number If I follow this plan and calculate for estimate inflation of 2.9%, and 31% for taxes, and the interest rate of 6% I would now have $377,437 after 50 years to fund the party (Bankrate, 2019). In this scenario, one needs to make some assumptions, such as the inflation rate and tax rate, which can both vary depending on the economy and location one lives. That said, it seems reasonable to be able to set aside $1,300 annually to have a legacy 50 years after one is gone.ReferencesBankrate (2019), Investment Calculator. Retrieved from https://www.bankrate.com/calculators/retirement/investment-goal-calculator.aspxByrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. Retrieved from https://content.ashford.edu/—————————————Required ResourceTextByrd, J., Hickman, K., & McPherson, M. (2013). Managerial Finance [Electronic version]. Retrieved from https://content.ashford.edu/* Chapter 3: Time is Money* Chapter 4: Time Value Applications – Security Valuations and Expected Returns* Chapter 6: Capital Budgeting – Investing to Create Value
