Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $60,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has $150,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.) Do not round intermediate calculations. Round your answer to the nearest dollar.

Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $60,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has $150,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.) Do not round intermediate calculations. Round your answer to the nearest dollar.

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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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?
You are saving for retirement. To live comfortably, you decide you will need to save $1 million by the time you are 65. Today is your 31st birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 9%, how much must you set aside each year to make sure that you will have $1 million in the account on your 65th birthday? $0 The amount to deposit each year is $ (Round to the nearest dollar.) et more help Clear all
Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he ex- pects to live for 25 years after he retires, that is, until he is 85. He wants a fixed retirement in- come that has the same purchasing power at the time he retires as $40,000 has today (he real- izes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then get 24 ad- ditional annual payments. Inflation is expected to be 5 percent per year from today forward; he currently has $100,000 saved up; and he expects to earn a return on his savings of 8 percent per year, annual compounding. To the nearest dollar, how much must he save during each of the years (with deposits being made at the end of each year) to meet his retirement goal? 6-22 Required annuity payments next 10
In our prior example, you need to have about $4,000,000 in savings at the age of 60 to fund retirement withdrawals that start at $250,000 on your 61st birthday, grow at 3% (the assumed inflation rate), and last for 35 years (i.e., from 61 to 95). You are currently 30 years old and have received an inheritance from your rich aunt. You have no savings. As in the prior example, assume that you will earn 8% per year on your investments. How large does the inheritance need to be to completely fund your retirement plan, which requires savings of $4,000,000 on your 60th birthday? $400,000 $500,000 $700,000 $600,000 $800,000
9) Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $78,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost her to buy such an annuity today?
Mr. X to retire at age 65 and believes that he can live comfortably with an annual pension of $76,000, to be withdrawn at the beginning of each year in his retirement. Suppose his pension account will generate 9% of annual interest rate, and suppose Mr.X believes tgat he will live to 100. In order to have sufficient money for his retirement , what is the minimum amount that Mr. X must have saved up in his pension account at the time of his retirement at of 65?
4. Many retired people buy annuities. With an annuity, a saver pays an insurance company a lump- sum amount in return for the company's promise to pay a certain amount per year until the buyer dies. With an ordinary annuity, when the buyer dies, there is no final payment to his or her heirs. Suppose that at age 65, David Alexander pays $180,000 for an annuity that promises to pay him $20,000 per year for the remaining years of his life. (a) If David dies 20 years after buying the annuity, write an equation that would allow you to calculate the interest rate (yield to maturity) that David received on his annuity (b) If David dies 17 years after buying the annuity, will the interest rate be higher or lower than if he dies after 20 years? Briefly explain.
Baghiben
Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 6% per year from today forward. He currently has $125,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning…
Suppose that Paolo is 45 years old and has no retirement savings. He wants to begin saving for retirement, with the first payment coming one year from now. He can save $12,000 per year and will invest that amount in the stock market, where it is expected to yield an average annual return of 8.00% return. Assume that this rate will be constant for the rest of his's life. Paolo would like to calculate how much money he will have at age 65. Using a financial calculator yields a future value of this ordinary annuity to be approximately Paolo would now like to calculate how much money he will have at age 70. Using a financial calculator yields a future value of this ordinary annuity to be approximately at age 65. Paolo expects to live for another 25 years if he retires at age 65, with the same expected percent return on investments in the stock market. Using a financial calculator, you can calculate that Paolo can withdraw retirement at age 65), assuming a fixed withdrawal each year and $0…
You invest $2000 today at 7% per year. If you leave thisfor your grandchildren by not touching the account for80 years, what is the amount of interest on interestearned for this investment? Please explain how to do this problem in the financial calculator. The most important thing is that I understand how to solve the problem on my own
Suppose that Kate is 45 years old and has no retirement savings. She wants to begin saving for retirement, with the first payment coming one year from now. She can save $20,000 per year and will invest that amount in the stock market, where it is expected to yield an average annual return of 5.00% return. Assume that this rate will be constant for the rest of her's life. In short, this scenario fits all the criteria of an ordinary annuity. Kate would like to calculate how much money she will have at age 60. Use the following table to indicate which values you should enter on your financial calculator. For example, if you are using the value of 1 for N, use the selection list above N in the table to select that value. Input Keystroke Output N Input Keystroke N Output I/Y Using a financial calculator yields a future value of this ordinary annuity to be approximately Kate would now like to calculate how much money she will have at age 65. Input Keystroke N Output Use the following table…

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