5-56. (Comprehensive present value) You are trying to plan for retirement in 10 years, and currently you have $100,000 in a savings account and $300,000 in stocks. In addition, you plan on adding to your savings by depositing $10,000 per year in your savings account at the end of each of the next 5 years and then $20,000 per year at the end of each year for the final 5 years until retirement. 1. Assuming your savings account returns 7 percent compounded annually, and your investment in stocks will return 12 percent compounded annually, how much will you have at the end of 10 years? (Ignore taxes.) 2. If you expect to live for 20 years after you retire, and at retirement you deposit all of your savings in a bank account paying 10 percent, how much can you withdraw each year after retirement (20 equal withdrawals beginning 1 year after you retire) to end up with a zero balance upon your death?
5-56. (Comprehensive present value) You are trying to plan for retirement in 10 years, and currently you have $100,000 in a savings account and $300,000 in stocks. In addition, you plan on adding to your savings by depositing $10,000 per year in your savings account at the end of each of the next 5 years and then $20,000 per year at the end of each year for the final 5 years until retirement. 1. Assuming your savings account returns 7 percent compounded annually, and your investment in stocks will return 12 percent compounded annually, how much will you have at the end of 10 years? (Ignore taxes.) 2. If you expect to live for 20 years after you retire, and at retirement you deposit all of your savings in a bank account paying 10 percent, how much can you withdraw each year after retirement (20 equal withdrawals beginning 1 year after you retire) to end up with a zero balance upon your death?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:5-56. (Comprehensive present value) You are trying to plan for retirement in 10 years, and
currently you have $100,000 in a savings account and $300,000 in stocks. In addition, you plan
on adding to your savings by depositing $10,000 per year in your savings account at the end of
each of the next 5 years and then $20,000 per year at the end of each year for the final 5 years
until retirement.
1. Assuming your savings account returns 7 percent compounded annually, and your
investment in stocks will return 12 percent compounded annually, how much will you
have at the end of 10 years? (Ignore taxes.)
2. If you expect to live for 20 years after you retire, and at retirement you deposit all of your
savings in a bank account paying 10 percent, how much can you withdraw each year after
retirement (20 equal withdrawals beginning 1 year after you retire) to end up with a zero
balance upon your death?
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