Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 35 years old, and she will retire when she is 65. She wants to receive annua payouts for twenty years, and she wants those payouts to receive an annual COLA of 4%. (a) She wants her first payout to have the same purchasing power as does $15,000 today. How big should that payout be if she assumes inflation of 4% per year? $ 48605.96 (b) How much money must she deposit when she is 65 if her money earns 8.3% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 40 before starting her ordinary annuity?

Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 35 years old, and she will retire when she is 65. She wants to receive annua payouts for twenty years, and she wants those payouts to receive an annual COLA of 4%. (a) She wants her first payout to have the same purchasing power as does $15,000 today. How big should that payout be if she assumes inflation of 4% per year? $ 48605.96 (b) How much money must she deposit when she is 65 if her money earns 8.3% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 40 before starting her ordinary annuity?

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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Bella is 23 years old and wants to invest money for her retirement. She wants to have $2,000,000 saved up when she retires at age 65. A) If she can earn 10% per year in an equity mutual fund, calculate the amount of money she would have to invest in equal annual amounts to achieve her retirement goal. B) Alteratively, how much would she have to invest in equal monthly amounts starting at the end of the current year or monthly respectively.
Melissa wants to retire with $45,000 per month.she needs $4,500,000 in principal at the time she retires in order to generate this amount of monthly income if the interest rate is 12%.If Melissa has 28 years before retirement and has $90,000 to invest today.What simple interest rate does she need to achieve the necessary amount of principal?
A young student 22 years old has just graduated from college. She accepts a good job and desires to establish her own retirement fund. At the end of each year thereafter she plans to deposit P2,000 in a fund at 15% annual interest. How old will she be when the fund has an accumulated value of P1,000,000?
Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal interest rate on savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d 5 275, r 5 0.05 (annual rate), and n 5 60, and the savings formula with r replaced by r/12 (the…
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%
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
Two people plan to invest $50,000. Matt is going to invest it in one lump sum and leave it in the account for 25 years to use for retirement. Sarah is going to invest $2000 per year for 25 years and will also use the money in the account for retirement. Is it reasonable to expect that Matt will have more money in his account than Sarah does in 25 years if both accounts earn the same interest?
Ms. Khan is preparing for her daughter's future wedding expenses. Her daughter is currently 15 years old, and Ms. Khan estimates that she will need $80,000 for the wedding when her daughter turns 23. (a) How much will she have to set aside today if the annual interest rate is 5% and the bank compounds it quarterly? (b) How much will she have to set aside today at the same rate if the bank compounds it daily? (c) Explain the difference in your answers above.
Joy is nearing retirement and is considering buying an annuity product from Wagon Financial. However, she is considering adding a clause that says she will only receive the annual $80,000 payment if she is alive at the time of the payment (up to a maximum of 20 payments). Other than this clause, the specifications for the annuity she is considering are exactly the same as described above. Should Joy expect the price for this product to be cheaper or more expensive by adding this clause?
Bobby has heard the importance of saving early for retirement. He wants to retire in 35 years. But he really likes traveling. Right now, he spends, on average, about $600 a month traveling. He is trying to decide if he should start saving his travel money for retirement now, or if he can continue traveling a few more years before beginning to save. Assume that he can find an annuity that pays 4.75% compounded quarterly. What is his future value if: a) He waits 20 years to start saving? N: P/Y: I%: C/Y: PMT: End or Begin $201,091.59 $658,935.54 $823,669.42 $1,000,000.00
Ms. Beeblebrox would like to save for her son's education by making monthly deposits of $60 at the end of every month starting when her son is born until he reaches 11 years old. She won't make any more contributions starting on her son's 11th. When her son turns 18 years old, she will use the funds to provide beginning of months payments for the next 5 years. Using an interest rate of J12=8%. Calculate the value of the payments

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