retire in 27 years. When you do, you would like to have the purchasing power of $114,071 today, during each year of retirement. Your cash is needed at the beginning of each year of retirement. Inflation is expected to be 3 % per year from now until the end of your retirement. Your retirement will last 21 years. You expect your 401K to earn 9 % per year during your retirement years. How much money do you need at the beginning of your retirement years, to "just meet" your retirement needs? (Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235
retire in 27 years. When you do, you would like to have the purchasing power of $114,071 today, during each year of retirement. Your cash is needed at the beginning of each year of retirement. Inflation is expected to be 3 % per year from now until the end of your retirement. Your retirement will last 21 years. You expect your 401K to earn 9 % per year during your retirement years. How much money do you need at the beginning of your retirement years, to "just meet" your retirement needs? (Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235
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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Question
You hope to retire in 27 years. When you do, you would like to have the purchasing power of $114,071 today, during each year of retirement. Your cash is needed at the beginning of each year of retirement. Inflation is expected to be 3 % per year from now until the end of your retirement. Your retirement will last 21 years. You expect your 401K to earn 9 % per year during your retirement years. How much money do you need at the beginning of your retirement years, to "just meet" your retirement needs? (Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235 while 1.23448 will be rounded to 1.234).
Expert Solution
Introduction
The present value of annuity due refers to the current value of a series of future payments. The present value can be obtained by discounting the future values at a set interest rate. Investors use the present value of annuity formula to determine the amount they would require in the present period to receive a series of predetermined future payments. The primary difference between the present value of annuity due and the present value of ordinary annuity is the time of receiving the payment. Under the present value of annuity due, the payment is received at the beginning of the month whereas, under ordinary annuity, the payment is received at the end of the month.
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