Hamza and Khalifa have been best friends since high school. They have recently learnt about the concept of superannuation, and are now both planning their retirement early. Both Hamza and Khalifa would like to have $2 million at the age of 60, each, when they retire. Hamza plans on depositing equal annual amounts into his superannuation fund on each birthday, starting at the age of 21, and ending at the age of 60 (that includes a deposit on the 60th birthday as well). Khalifa, however, starts making deposits into his superannuation fund on his 30th birthday and plans to deposit equal annual amounts on each birthday until he turns 60 (that includes a deposit on the 60th birthday as well). If the investment funds earn 10% per year, calculate the amounts the Hamza and Khalifa respectively will have to save each year to meet their retirement goals. Comment on the difference.

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
icon
Related questions
Question
  • Hamza and Khalifa have been best friends since high school.
  • They have recently learnt about the concept of superannuation, and are now both planning their retirement early.
  • Both Hamza and Khalifa would like to have $2 million at the age of 60, each, when they retire.
  • Hamza plans on depositing equal annual amounts into his superannuation fund on each birthday, starting at the age of 21, and ending at the age of 60 (that includes a deposit on the 60th birthday as well).
  • Khalifa, however, starts making deposits into his superannuation fund on his 30th birthday and plans to deposit equal annual amounts on each birthday until he turns 60 (that includes a deposit on the 60th birthday as well).
  • If the investment funds earn 10% per year, calculate the amounts the Hamza and Khalifa respectively will have to save each year to meet their retirement goals. Comment on the difference.
Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Employer Pension Plan
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education