Ruby is 25 and has a good job at a biotechnology company. She currently has $10,400 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). a. How much will Ruby's IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.) Future value of IRA b. How much money will she have to accumulate in her company's 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.) Required future value of 401(k)

Ruby is 25 and has a good job at a biotechnology company. She currently has $10,400 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). a. How much will Ruby's IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.) Future value of IRA b. How much money will she have to accumulate in her company's 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.) Required future value of 401(k)

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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Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with her employer. Amy's contribution, plus that of her employer, amounts to $2,400 per year starting at age 23. Amy expects this amount to increase by 4% each year until she retires at the age of 57 (there will be 35 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if it earns an annual interest rate of 7% per year? (a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places.) (b) What will be the compounded future value if the plan earns an annual interest rate of 4% per year (instead of 7% per year)? $ million. (Round to three decimal places.)
Janine is 25 and has a good job at a biotechnology company. Janine estimates that she will need $946,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $24,500 a year. (She expects that Social Security will pay her an additional $16,000 a year.) She currently has $7,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 6 percent, and she plans to leave it untouched until she retires at age 65. How much money will Janine have to accumulate in her company's 401(k) plan over the next 40 years in order to reach her retirement income goal? Use Exhibit 1-A. (Round time value factor to 3 decimal places. Round intermediate and final answer to 2 decimal places.) 401(k) accumulation
Alex is interested in saving for retirement and lands a job that offers to contribute one-third of what he contributes to a 401k account. Alex is nervous about losing money so he opts for a low-risk investment that has an APR of 3.1%. If Alex is 33 years away from retiring, and contributes $150 each month, Excel reports that there will be $135,032.93 in the account when he retires.
Molly Lincoln, a 25-year-old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,500 per year for her retirement fund and assumes that she'll retire at age 65. How much will Molly have accumulated when she turns 65 if she invests in equities and earns 8 percent on average? Round your answer to the nearest dollar. Molly is urging her friend, Isaac Stein, to start his plan right away, too, because he's 45. What would his nest egg amount to if he invested in the same manner as Molly and he, too, retires at age 65? Round your answer to the nearest dollar. 2a. Nest egg at 4% 2b. Nest egg at 8%
Simon just turned 66 and is trying to decide whether to take his Social Security benefits today or to wait until he is 70. The risk-free rate of interest is 2%, and Simon anticipates that this rate will not change in the foreseeable future. If Simon decides to take his benefits at age 66 (his current age), he will get 12*$2,216 = $26,592 per year. If he waits 4 years, he will get $3,067 per month. 1) Simon estimates that he will die on his 85th birthday. Should he wait until 70 or take the Social Security now? Note: In doing this problem, assume that benefits are paid at the end of the year in which they are taken. Also assume that Simon will die exactly on his birthday. Your Retirement Benefit Estimate The amount you receive when you first start your benefits sets the base amount you will get for the rest of your life. You can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of Jime. Assuming you continue earning about the same…
Colin is 40 years old and wants to retire in 27 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 95. He currently has a salary of $150,000 and expects that he will need about 75% of that amount annually if he were retired. He can earn 8 percent from his portfolio and expects inflation to continue at 3 percent. Some years ago, he worked for the government and expects to receive an annuity that will pay him $20,000 in today's dollars per year beginning at age 67. The annuity includes a cost of living adjustment, which is equal to inflation. Colin currently has $200,000 invested for his retirement. His Social Security benefit in today's dollars is $30,000 per year at normal age retirement of age 67. How much does he need to accumulate at age 67 exclusive of his pension and Social Security benefits? ANSWER CHOICES: $2.2 million $2.1 million $2.8 million $2.9 million
Jordan is 55 and wants to retire in 12 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 97. He currently has a salary of $100,000 and expects that he will need about 82% of that amount annually if he were retired. He can earn 9 percent in his portfolio and expects inflation to continue at 3 percent. Jordan currently has $325,000 invested for his retirement. His Social Security benefit in today’s dollars is $30,000 per year at normal age retirement of age 67. How much does he need to save each year at year end to meet his retirement goals? 1. $6,245. 2. $7,659. 3. $8,432. 4. $9,252.
Manya and Sarah are both starting out in their careers. They choose two different paths to saving in their 401k accounts for their retirements. Manya is 23 years old and decides to start depositing $500 monthly in her 401k which will earn 7.6% APR. Manya will retire at the age of 67. a) How many years will Manya be saving money in her 401k? years b) How much will be in Manya's 401k when she retires? $ c) How much will Manya have deposited herself over her years of working from her salary? d) How much will Manya have earned in interest over her years of working? Sarah waits to begin depositing money into a 401k (for various reasons that seemed important at the time...) until she was 45 years old. She decides to deposit twice as much as Manya per month hoping to catch up. Assume that Sarah gets the same 7.6% APR and will retire at the same age of 67. e) How many years will Sarah be saving money in her 401k. years f) How much will Sarah be depositing in her account each month? g) How much…
The Ali plan to retire and start receiving their Social Security benefits at the same time, when Jimmy is 67 and Lucy is 62 years old. Their monthly Social Security retirement benefits at those ages in today's dollars are estimated to be $3,200 for Jimmy and $2,000 for Lucy. They think their expenses in retirement in today's dollars will be 70% of their total cash outflows now. Other than Social Security, they will rely on their retirement savings in order to meet their retirement expenses. They want to assume they will die in the same year, when Jimmy is 95 and Lucy is 90 years old.Determine what the payments will be in the distribution phase. These will be the withdrawals Jimmy and Lucy will need to take monthly from their accounts, in order to meet their retirement expenses. How much is that monthly amount?Note: this question is asking about the withdrawals they will need, not about the expenses they will be incurring monthly.
Two friends, Alysha and Betty, are planning for their retirement. Both are 20 years old and plan on retiring in 40 years with $1,000,000 each. Betty plans on making annual deposits beginning in one year (total of 40 deposits) while Alysha plans on waiting and then depositing twice as much as Betty deposits. If both can earn 4.20 percent per year, how long can Alysha wait before she has to start making her deposits? (Round answer to 2 decimal places, e.g. 125. Do not round your intermediate calculations.) Alysha can wait for years

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