John is 20 years old now (t=0). He wants to retire on his 50th birthday (t=30) with $1 million on his retirement account. To achieve this goal, John decides to make annual payments to his retirement account starting from his 21st birthday (t=1) so that the account would have $1,000,000 on his 50th birthday (t=30) after his last payment on the day. The retirement account is expected to deliver a 10% annual return. a. What is John's annual payment to his retirement account if his annual payment is a fixed amount of dollars? b. What is John's first payment to his retirement account if his annual payment grows 3% per year? O A. (a) $6,079.28; (b) $5,531.23 O B. (a) $7,018.25; (b) $5,531.23 OC. (a) $5,091.15; (b) $3,043.21 O D. (a) $6,079.25; (b) $4,659.79
John is 20 years old now (t=0). He wants to retire on his 50th birthday (t=30) with $1 million on his retirement account. To achieve this goal, John decides to make annual payments to his retirement account starting from his 21st birthday (t=1) so that the account would have $1,000,000 on his 50th birthday (t=30) after his last payment on the day. The retirement account is expected to deliver a 10% annual return. a. What is John's annual payment to his retirement account if his annual payment is a fixed amount of dollars? b. What is John's first payment to his retirement account if his annual payment grows 3% per year? O A. (a) $6,079.28; (b) $5,531.23 O B. (a) $7,018.25; (b) $5,531.23 OC. (a) $5,091.15; (b) $3,043.21 O D. (a) $6,079.25; (b) $4,659.79
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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Please answer multi-choice question in photo.
Transcribed Image Text:John is 20 years old now (t=0). He wants to retire on his 50n birthday (t=30) with $1 million on his retirement account. To achieve this goal, John decides to make annual
payments to his retirement account starting from his 21st birthday (t=1) so that the account would have $1,000,000 on his 50h birthday (t=30) after his last payment on the day.
The retirement account is expected to deliver a 10% annual return.
a. What is John's annual payment to his retirement account if his annual payment is a fixed amount of dollars?
b. What is John's first payment to his retirement account if his annual payment grows 3% per year?
A. (a) $6,079.28; (b) $5,531.23
B. (a) $7,018.25; (b) $5,531.23
C. (a) $5,091.15; (b) $3,043.21
O D. (a) $6,079.25; (b) $4,659.79
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