Kit Fox is the finance manager at Builtrite and she just noticed that one employee-Terry Dactel-has a guaranteed 25 year pension annuity which will pay him $42,000 annually for 25 years. Terry will be retiring in 20 years. Kit also noticed that no funds have been set aside for Terry's retirement. Once the employee retires, the retirement pension account typically earns 4% annually and company deposits into the fund (before the employee retires) are invested in mutual funds which have been earning 9% annually. How much will Kit Fox need to deposit each year in order to fund Terry Dactel's retirement? O $12,825 O $22,346 O $28,671 $24,411

Kit Fox is the finance manager at Builtrite and she just noticed that one employee-Terry Dactel-has a guaranteed 25 year pension annuity which will pay him $42,000 annually for 25 years. Terry will be retiring in 20 years. Kit also noticed that no funds have been set aside for Terry's retirement. Once the employee retires, the retirement pension account typically earns 4% annually and company deposits into the fund (before the employee retires) are invested in mutual funds which have been earning 9% annually. How much will Kit Fox need to deposit each year in order to fund Terry Dactel's retirement? O $12,825 O $22,346 O $28,671 $24,411

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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Concept explainers

Retirement Income

Retirement income is the income received by the retiring person after retirement. Income can either be paid every month or paid annually. The retiree would get a guaranteed income until their death. Retirement income payment differs from person to person based on their investment type and payment method. Some are paid on a lump-sum basis and some are paid in a regular series with fixed payment or variable cash flow. Retirement income can be created from retirement savings, investment, salary, bonus, and wages from employment. Every working individual should plan their retirement income according to their income goals for the future. The plan should be made by identifying suitable income sources, estimating future expenses, applying a savings plan, and managing risk and assets. The most common age for retirement is between 60-65 years.

Question

Kit Fox is the finance manager at Builtrite and she just noticed that one employee-Terry Dactel-has
a guaranteed 25 year pension annuity which will pay him $42,000 annually for 25 years. Terry will
be retiring in 20 years. Kit also noticed that no funds have been set aside for Terry's retirement.
Once the employee retires, the retirement pension account typically earns 4% annually and
company deposits into the fund (before the employee retires) are invested in mutual funds which
have been earning 9% annually. How much will Kit Fox need to deposit each year in order to fund
Terry Dactel's retirement?
O $12,825
O $22,346
O $28,671
O $24,411

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