Questions:- John wishes to create his own life annuity plan. He expects to retire at age 60. He plans to deposit a fixed amount of money in a retirement account each year starting from age 30. Assume all amounts are deposited or withdrawn at the end of the year. Suppose the account can earn an annual rate of 5%. 1. (a) If John wants to withdraw $120,000 each year starting from age 60 for the next 20 years, calculate the amount that should be accumulated in the retirement account at age 60. (7%) (b) Calculate the fixed amount of money that John requires to deposit per year for 30 years, starting from age 30 to accumulate the amount (8%) calculated in part (a). (c) In the past 5 years, Industrial and Commercial Bank of China (ICBC) has offered a stable dividend distribution of HK$0.26 per share each year. What is the annual rate of return of this investment if you can (5%) buy ICBC share at $5.2 in the market?
Questions:- John wishes to create his own life annuity plan. He expects to retire at age 60. He plans to deposit a fixed amount of money in a retirement account each year starting from age 30. Assume all amounts are deposited or withdrawn at the end of the year. Suppose the account can earn an annual rate of 5%. 1. (a) If John wants to withdraw $120,000 each year starting from age 60 for the next 20 years, calculate the amount that should be accumulated in the retirement account at age 60. (7%) (b) Calculate the fixed amount of money that John requires to deposit per year for 30 years, starting from age 30 to accumulate the amount (8%) calculated in part (a). (c) In the past 5 years, Industrial and Commercial Bank of China (ICBC) has offered a stable dividend distribution of HK$0.26 per share each year. What is the annual rate of return of this investment if you can (5%) buy ICBC share at $5.2 in the market?
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:Questions:-
John wishes to create his own life annuity plan. He expects to retire at
age 60. He plans to deposit a fixed amount of money in a retirement
account each year starting from age 30. Assume all amounts are
deposited or withdrawn at the end of the year. Suppose the account
can earn an annual rate of 5%.
1.
(a) If John wants to withdraw $120,000 each year starting from age 60
for the next 20 years, calculate the amount that should be
accumulated in the retirement account at age 60.
(7%)
(b) Calculate the fixed amount of money that John requires to deposit per
year for 30 years, starting from age 30 to accumulate the amount (8%)
calculated in part (a).
(c)
In the past 5 years, Industrial and Commercial Bank of China (ICBC)
has offered a stable dividend distribution of HK$0.26 per share each
year. What is the annual rate of return of this investment if you can (5%)
buy ICBC share at $5.2 in the market?
(d) John wishes to invest in shares to create his life annuity plan. What
are the potential risks of this method to provide a steady income?
(5%)
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