Professor Sandra Laneway received a payment of $500,000 from her grandmother’s estate on what is coincidentally her 63rd birthday. Sandra invested the entire inheritance amount today at an interest rate of 8% per annum (compounded monthly) which is due to mature on her 70th birthday when she plans to retire from her job at Sydney University. Upon retirement Sandra plans to commute her investments to a monthly pension which she plans to receive until her 90th birthday. During this 20 years of post-retirement Sandra estimates that she will require an annual pension income of $84,000 ($7,000 per month) in order to live in the manner to which she is accustomed. She expects to receive her first monthly pension payment 1 month after her 70th birthday. In addition, Sandra would like to have a remaining balance of $200,000 in her account at the conclusion of her 20 year pension. Sandra expects to earn a more conservative 6% pa (compounded monthly) over the 20 years following her retirement. Sandra understands that the $500,000 inheritance she has invested will not achieve all of these things and wants to invest an additional monthly amount form her pre-retirement income as a Professor at Sydney University during the next 7 years leading to her planned retirement. Calculate how much Professor Laneway needs to invest each month (starting in one month’s time) in order to achieve her investment goals.
Professor Sandra Laneway received a payment of $500,000 from her grandmother’s estate on what is coincidentally her 63rd birthday. Sandra invested the entire inheritance amount today at an interest rate of 8% per annum (compounded monthly) which is due to mature on her 70th birthday when she plans to retire from her job at Sydney University.
Upon retirement Sandra plans to commute her investments to a monthly pension which she plans to receive until her 90th birthday. During this 20 years of post-retirement Sandra estimates that she will require an annual pension income of $84,000 ($7,000 per month) in order to live in the manner to which she is accustomed. She expects to receive her first monthly pension payment 1 month after her 70th birthday. In addition, Sandra would like to have a remaining balance of $200,000 in her account at the conclusion of her 20 year pension. Sandra expects to earn a more conservative 6% pa (compounded monthly) over the 20 years following her retirement.
Sandra understands that the $500,000 inheritance she has invested will not achieve all of these things and wants to invest an additional monthly amount form her pre-retirement income as a Professor at Sydney University during the next 7 years leading to her planned retirement.
Calculate how much Professor Laneway needs to invest each month (starting in one month’s time) in order to achieve her investment goals.
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