Need help with this accounting question A young couple, age 25, is doing some retirement planning. They planto retire in 40 years at age 65. They think they will live for 20 years inretirement until age 85. During retirement, they plan to travel and livewell, so they expect to spend $80,000 per year during their retirementyears. They believe that they can earn 5% interest on their retirementsavings.1. How much money does this couple need to have in their retirementaccount on the day they retire (age 65), in order to withdraw $80,000per year during their 20 years in retirement, if their retirement fund isearning 5%? They do not want to leave an inheritance for anyone.2. How much could this couple spend each year in retirement if theywanted to be sure to leave an inheritance of $250,000 for theirgrandchildren?3. How much should this couple save each year starting at age 25 toreach their retirement goal at age 65, assuming they can earn 9% eachyear on their investment?

Step 1: Define Retirement AccountThe account which is prepared to accumulate the funds to be…

Answered: A young couple, age 25, is doing some…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 43P

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Need help with this accounting question
A couple will retire in 40 years; they paln to spend about $23,000 a retirement, which should last about 20 years. They believe that they can earn 9% interest on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? b. How would the answer to part (a) change if the couple realizes that in 15 years they will need to spend $63,000 on their childs college education?
A couple just got married and they are both 25 years of age. They each plan to retire in 40 years at the age of 65. They want to be able to receive $200,000 at the end of each year for 20 years, upon retirement(so their first retirement payment will be at 41)Currently they have a total of $2,000 in cash savings. How much must they save at the end of each year for the next 40 years so as to have enough money to achieve their current goal? Assume the interest rate is 8% and will remain the same. Also assume that they start saving at the end of the first year.
A client needs assistance with retirement planning. Here are the facts: The client, Dave, is 21 years old. He wants to retire at 65. Dave has disposable income of $2,000 per month. The IRA Dave has chosen has an average annual return of 8%. Question 1. If Dave contributes half of his disposable income to the account, what will it be worth at 65? Question 2. How much would he need to contribute to have $5,000,000 at 65?
A 40-year-old woman decides to put funds into a retirement plan. She can save $3,000 a year and earn 7 percent on this savings. How much will she have accumulated if she retires at age 65? Use Appendix C to answer the question. Round your answer to the nearest dollar.$ At retirement how much can she withdraw each year for 25 years from the accumulated savings if the savings continue to earn 7 percent? Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Appendix C
A couple will retire in 50 years; they plan to spend about $26,000 a year (in current dollars) in retirement, which should last about 25 years. They believe that they can earn a real interest rate of 9% on retirement savings. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $56,000 on their child’s college education?
A couple just got married and they are both 25 years of age. They each plan to retire in 40 years at the age of 65. They want to be able to receive $200,000 at the end of each year for 20 years, upon retirement. Currently they have a total of $2,000 in cash savings. In addition they expect to receive a total of $100,000 as a retirement bonus at the end of 40 years from their employer. How much must they save at the end of each year for the next 40 years so as to have enough money to achieve their retirement goal? Assume the interest rate is 8% and will remain the same.Using all the answers to the previous questions, what is the present value today of the amount that they need to save up to reach their retirement objective?
A 45-year-old woman decides to put funds into a retirement plan. She can save $2,000 a year and earn 6 percent on this savings. How much will she have accumulated if she retires at age 65? At retirement how much can she withdraw each year for 20 years from the accumulated savings if the savings continue to earn 6 percent?
Using the Time Value of Money for Retirement Planning. Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement account?
1. If you want to have $500,000 when you retire and you put $85,000 in your retirement account right now, and you can get an interest rate of 5.2% a year, how many years will it take you to achieve your goal? 2. Sammy decides to set up a retirement fund. He deposits $7,000 a year. He earns an annual interest rate of 4.5. How much will Sammy have in his retirement fund in 25 years? 3. Sammy wants to see what his retirement fund would be if he made $7,000 deposits at the first of every year instead of at the end. How much will Sammy have im his retirement fund in 25 years at the rate of 4.5% if the deposits are made at the beginning of the year? 4. Sammy wants to help a fellow small business owner. The other owner, Mr. Noles offers to pay Sammy $4,250 a year for 8 years in exchange for a loan of $28,000. If the interest rate is 4.2%, is this a good investment for Sammy? What is the present value of this annuity?
3. A 45-year-old woman decides to put funds into a retirement plan. She can save $2,000 a year and earn 6 percent on this savings. a. How much will she have accumulated if she retires at age 65?
This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $80,000 from her savings account on each birthday for 15 years following her retirement; the first withdrawal will be on her 66th birthday. Your friend intends to invest her money in the local credit union, which offers 9 percent interest per year. She wants to make equal annual payments on each birthday into the account established at the credit union for her retirement fund. If she starts making these deposits on her 36th birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), what amount must she deposit annually to be able to make the desired withdrawals at retirement? Suppose your friend has just inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump-sum…

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