After completing your Bachelor of Business (Accounting) degree, suppose you secure a permanent position as an accountant. You drafted a financial plan to retire in 35 years from now andthinking about creating a fund that will allow you to receive $25,000 at the end of each year for 30years after your retirement. The interest rates areexpected to be 2.45% per annum during the 35- year pre-retirement period and 3.15% during retirement. Required: a) To provide the 30-year, $ 25,000-a-year annuity, calculate how much should be in the fund account when you retire in 35 years. b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn 2.75% per year during the 35-yearpre-retirement period? c) (Using different interest rates) Assume that the interest in the pre-retirement period is 2.15% and in the post-retirement period, it is 3.05%. To fund the 30-year annual annuity payments of $25,000, how much do you need to save annually until retirement? (Deposits are made at the end of each period for 35 years).
After completing your Bachelor of Business (Accounting) degree, suppose you secure a permanent position as an accountant. You drafted a financial plan to retire in 35 years from now andthinking about creating a fund that will allow you to receive $25,000 at the end of each year for 30years after your retirement. The interest rates areexpected to be 2.45% per annum during the 35- year pre-retirement period and 3.15% during retirement. Required: a) To provide the 30-year, $ 25,000-a-year annuity, calculate how much should be in the fund account when you retire in 35 years. b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn 2.75% per year during the 35-yearpre-retirement period? c) (Using different interest rates) Assume that the interest in the pre-retirement period is 2.15% and in the post-retirement period, it is 3.05%. To fund the 30-year annual annuity payments of $25,000, how much do you need to save annually until retirement? (Deposits are made at the end of each period for 35 years).
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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After completing your Bachelor of Business (Accounting) degree, suppose you secure a permanent position as an accountant. You drafted a financial plan to retire in 35 years from now andthinking about creating a fund that will allow you to receive $25,000 at the end of each year for 30years after your retirement. The interest rates areexpected to be 2.45% per annum during the 35- year pre-retirement period and 3.15% during retirement.
Required:
a) To provide the 30-year, $ 25,000-a-year annuity , calculate how much should be in the fund account when you retire in 35 years.
b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn 2.75% per year during the 35-yearpre-retirement period?
c) (Using different interest rates) Assume that the interest in the pre-retirement period is 2.15% and in the post-retirement period, it is 3.05%. To fund the 30-year annual annuity payments of $25,000, how much do you need to save annually until retirement? (Deposits are made at the end of each period for 35 years).
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