money at 10.7% interest per year. How much money must she accumulate by the time she retires in order to make these withdrawals? (Round your answer to the nearest dollar)
money at 10.7% interest per year. How much money must she accumulate by the time she retires in order to make these withdrawals? (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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Transcribed Image Text:Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at
age 65. She wants to be able to withdraw $130,000 from her savings account on each birthday for 24 years
following her retirement, the first withdrawal will be on her 66th birthday. Your friend intends to invest her
money at 10.7% interest per year. How much money must she accumulate by the time she retires in order to
make these withdrawals? (Round your answer to the nearest dollar)
Expert Solution
Step 1: Introduction:
Present value illustrates the current value of a sum of money that will be received or paid in the future after accounting for the time value of the money. It takes into consideration the fact that a specific amount of money today is valued higher than a similar amount in the future because of things like inflation and the possibility of earning interest. By comparing investment alternatives, determining the profitability of a particular investment, or determining how interest rates affect the value of future cash flows, the present value computation aids in the making of well-informed financial decisions
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