Retirement planning Your sister turned 35 today, and she is planning to save $5,000 per year for retirement, with the first deposit made one year from today and the last deposit made on her 65th birthday. She currently has no retirement savings. She will invest in a mutual fund, which she expects to provide a return of 10% per year throughout her lifetime. She plans to retire 30 years from today when she turns 65. She will make a total of 20 annual withdrawals—with her first withdrawal made on her 66th birthday, and the last withdrawal made when she is 85. After the last withdrawal there will be $500,000 left in the account. Under these assumptions, how much can she spend in each year after she retires? 10. a. $71,880.34 b. $79,888.38 c. $83,882.80 d. $87,877.22 e. $98,125.22

Retirement planning Your sister turned 35 today, and she is planning to save $5,000 per year for retirement, with the first deposit made one year from today and the last deposit made on her 65th birthday. She currently has no retirement savings. She will invest in a mutual fund, which she expects to provide a return of 10% per year throughout her lifetime. She plans to retire 30 years from today when she turns 65. She will make a total of 20 annual withdrawals—with her first withdrawal made on her 66th birthday, and the last withdrawal made when she is 85. After the last withdrawal there will be $500,000 left in the account. Under these assumptions, how much can she spend in each year after she retires? 10. a. $71,880.34 b. $79,888.38 c. $83,882.80 d. $87,877.22 e. $98,125.22

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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This is a classic retirement problem. A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retire- ment spending goals: Years until retirement: Amount to withdraw each year: Years to withdraw in retirement: Interest rate: 30 $90,000 20 8% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. a. If she starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals at retirement?
4. Amy Johnson wants to retire on $75,000 per year for her life expectancy of 20 years after she retires. She estimates that she will be able to earn an interest rate of 10.1%, compounded annually, throughout her lifetime. To reach her retirement goal, Amy will make annual contributions to her account for the next 30 years. One year after making her last deposit, she will receive her first retirement check. How large must her yearly contribution be?
Considering inflation, Joanna is advised that she will need $4,500 a month for living expense once she is retired. She plans for her retirement savings to last 20 years, with the first withdrawal on the date of her retirement. How much will she need to have saved at the start of her retirement, if she invests at 5% compounded semi-annually. And how much will she need to contribute at the end of each month for 25 years to meet this new retirement goal with an initial investment of $50,000?
Your uncle Mohammed is celebrating his 33th birthday today and wants to start saving for his retirement at the age of 63. He wants to be able to withdraw AED 100,000 from his saving account on each birthday for 20 years following his retirement. The first withdraw will be on his 64th birthday. Your uncle intends to invest his money in a local bank in Abu Dhabi that offers 7% interest rate per year. He wants to make equal payments on each birthday into the account established in the local bank for his retirement fund. If your uncle starts making these deposits on his 33th birthday and continues to make deposits until he is 63, what amount must he deposit annually to be able to make the desired withdrawals at retirement?
20
To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns 65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first one right away, and makes deposits at the beginning of each year for 25 years. How much does he need to deposit each year in order to save enough to buy his annuity?
Una Day is planning to retire in 14 years, at which time she hopes to have accumulated enough money to receive an annuity of $17,000 a year for 19 years of retirement. During her pre-retirement period she expects to earn 8 percent annually, while during retirement she expects to earn 10 percent annually on her money. What annual contributions to this retirement fund are required for Una to achieve her objective and sleep well at night? (Use a Financial calculator to arrive at the answer. Do not round intermediate calculations. Round the final answer to the nearest whole dollar.) Annual contribution $ 7,422 x
Your sister turned 35 today, and she is planning to save $60,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 7.5% per year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can she spend each year after she retires? Her first withdrawal will be made at the end of her first retirement year. a. $266,770.46 b. $556,561.79 c. $598,303.93 d. $517,731.90 e. $248,158.57
Imagine you are helping a client, Jill Pole, prepare for retirement Jill would like to withdraw $14,411 from her retirement fund exactly one month after she quits her job. Jill would like all subsequent monthly withdrawals to grow at an effective annual rate of 2.5%. Further, Jill would like to have her funds invested to earn an effective annual return of 7.7%. Jill expects to live for 26 years once she retires and does not plan to leave an inheritance. How much does Jill need to have in her retirement account on the day she retires in order to fund this stream of growing monthly distributions from her retirement account?.
Una Day is planning to retire in 11 years, at which time she hopes to have accumulated enough money to receive an annuity of $21,000 a year for 16 years of retirement. During her pre-retirement period she expects to earn 12 percent annually, while during retirement she expects to earn 14 percent annually on her money. What annual contributions to this retirement fund are required for Una to achieve her objective and sleep well at night? (Use a Financial calculator to arrive at the answer. Do not round intermediate calculations. Round the final answer to the nearest whole dollar.) Annual contribution $
A 30 year - old person plans to retire at 64 and live until 92. During retirement, the person will take a growing annuity from the retirement account. The amount in the first year will be $90,000 with a 2% growth rate. The return on savings before retirement is 9%, an after retirement is 6%. Initial savings are zero, and the person does not want to leave a legacy at the time of death. How much must the person save per year before retirement to achieve this goal?

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