A young couple plans to invest part of their salary to finance their retire- ment. They want to have enough in the account to draw £1500 a month every month for 20 years, beginning 35 years from now. The account pays 2.5% interest per year, compounded monthly. The account should be empty at the end of the 20 years period. (i) How much money will they need to have accumulated 35 years from now to accomplish the financial objective? Assume they stop paying into the account at the end of the 35 years accumulation period. (ii) How much must the couple pay into the account each month during the 35 years accumulation period?
A young couple plans to invest part of their salary to finance their retire- ment. They want to have enough in the account to draw £1500 a month every month for 20 years, beginning 35 years from now. The account pays 2.5% interest per year, compounded monthly. The account should be empty at the end of the 20 years period. (i) How much money will they need to have accumulated 35 years from now to accomplish the financial objective? Assume they stop paying into the account at the end of the 35 years accumulation period. (ii) How much must the couple pay into the account each month during the 35 years accumulation period?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:(b) A young couple plans to invest part of their salary to finance their retire-
ment. They want to have enough in the account to draw £1500 a month
every month for 20 years, beginning 35 years from now. The account
pays 2.5% interest per year, compounded monthly. The account should
be empty at the end of the 20 years period.
(i) How much money will they need to have accumulated 35 years from
now to accomplish the financial objective? Assume they stop paying
into the account at the end of the 35 years accumulation period.
(ii) How much must the couple pay into the account each month during
the 35 years accumulation period?
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