Katie recently retired and met with her financial planner. She arranged to receive $40,000 the first year. Because of inflation, each year she will get s more than she received the previous year. a) What income will she receive in her eighth year of retirement? b) How much money will she have received in total during her first 8 years of retirement? a) Her income will be $

Katie recently retired and met with her financial planner. She arranged to receive $40,000 the first year. Because of inflation, each year she will get s more than she received the previous year. a) What income will she receive in her eighth year of retirement? b) How much money will she have received in total during her first 8 years of retirement? a) Her income will be $

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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A woman is planning for retirement in 30 years and decides she can deposit $6,000 each year on December 31 into a retirement savings plan that she expects will pay 6% interest. In 20 years she also expects to receive a small inheritance of $12,000 that she can also put into her retirement fund. The woman anticipates that her retirement fund will need to last 20 years; she estimates that she will need $60,000 at the end of each year in retirement to cover her living expenses. Her plan is flawed. How much extra does she need to save every year (rounded to dollars and cents) to achieve her goals? (Do not round interim calculations)
Ashley invests $250 a month in her 401(k) retirement account, which earns an 8 percent annual return. After 35 years, how much money will she have in the account over and above the amounts she will contribute through the years?
Melissa wants to retire with $45,000 per month.she needs $4,500,000 in principal at the time she retires in order to generate this amount of monthly income if the interest rate is 12%.If Melissa has 28 years before retirement and has $90,000 to invest today.What simple interest rate does she need to achieve the necessary amount of principal?
Monica has decided that she wants to build enough retirement wealth, if invested at 8 percent per year, to provide her with $3,500 of monthly income for 20 years. To date, she has saved nothing, but she still has 30 years until she retires. How much money does she need to contribute per month to reach her goal? First compute how much money she will need at retirement, then compute the monthly contribution to reach that goal.
Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 25 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of 2.8%. (a) She wants her first payout to have the same purchasing power as does $14000 today. How big should that payout be if she assumes inflation of 2.8% per year? (b) How much money must she deposit when she is 65 if her money earns 8.1% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 30 before starting her ordinary annuity?
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Una Day is planning to retire in 14 years, at which time she hopes to have accumulated enough money to receive an annuity of $17,000 a year for 19 years of retirement. During her pre-retirement period she expects to earn 8 percent annually, while during retirement she expects to earn 10 percent annually on her money. What annual contributions to this retirement fund are required for Una to achieve her objective and sleep well at night? (Use a Financial calculator to arrive at the answer. Do not round intermediate calculations. Round the final answer to the nearest whole dollar.) Annual contribution $ 7,422 x
Imagine you are helping a client, Jill Pole, prepare for retirement Jill would like to withdraw $14,411 from her retirement fund exactly one month after she quits her job. Jill would like all subsequent monthly withdrawals to grow at an effective annual rate of 2.5%. Further, Jill would like to have her funds invested to earn an effective annual return of 7.7%. Jill expects to live for 26 years once she retires and does not plan to leave an inheritance. How much does Jill need to have in her retirement account on the day she retires in order to fund this stream of growing monthly distributions from her retirement account?.
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