Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She isnow 25 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, andshe wants those payouts to receive an annual COLA of 2.8%.(a) She wants her first payout to have the same purchasing power as does $14000 today. How big should thatpayout be if she assumes inflation of 2.8% per year?(b) How much money must she deposit when she is 65 if her money earns 8.1% 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 30 before starting her ordinary annuity?

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Answered: Shelly Franks is planning for ner…

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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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 annual 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? %$4
8) Terry Austin is 30 years old and is saving for her retirement. She is planning on making 36 contributions to her retirement account at the beginning of each of the next 36 years. The first contribution will be made today (t = 0) and the final contribution will be made 35 years from today (t = 35). The retirement account will earn a return of 10 percent a year. If each contribution she makes is $3,000, how much will be in the retirement account 35 years from now (t = 35)?
Gina is 25 years old and wants to save $800,000 for retirement in 30 years. Assume she invests in a savings account that earns at least the current rate of inflation (6.5%). Determine how much money Gina must save based on the number of years that she waits to start saving to reach her retirement goal. Years of Waiting to Save Principal Required 0 10 20 30 $800,000
Your parents will retire in 20 years and currently have $108,000 saved in a retirement account. They think they will be okay with $700,000 at retirement since your mom also has a pension and they should both get some money from Social Security. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? 7.02% 8.36% 8.97% 9.80% 10.31%.
Your client is 38 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $14,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 8% in the future. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent. $ How much will she have at 70? Do not round intermediate calculations. Round your answer to the nearest cent. $ She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Do not round intermediate calculations. Round your answers to the nearest cent. Annual withdrawals if she retires at 65: $ Annual withdrawals if she retires at 70: $
Your parents will retire in 20 years. They currently have $350,000 saved, and they think they will need $1,850,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places. %
You are 30 years old today. You want to retire at the age of 55. You expect to live until age 90. You would like to have a monthly income of $9,000 per month in retirement. How much do you have to save per month during your working years in order to achieve your retirement goal? Assume end of period payments. Assume an annual interest rate of 3.5% in retirement and 5% during your working life. How much do you have to save per month during your working years in order to achieve your retirement goal? $ (Round to the nearest cent.)
Gd
Heather is planning to retire in 14 years. She will then need an income of $1516 at the end of every month for the subsequent 25 years. She is going to make one investment today to provide all of the money she will eventually collect. Her investments will earn 8.30% compounded monthly. How much should she invest today? Round your answer to two decimal places. Do not enter the $ sign. Sample input: 124, 340.34
Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $50,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost her to buy such an annuity today?
Your client is 31 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $1,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 8% in the future. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent. $ How much will she have at 70? Do not round intermediate calculations. Round your answer to the nearest cent. $ She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Do not round intermediate calculations. Round your answers to the nearest cent. Annual withdrawals if she retires at 65: $ Annual withdrawals if she retires at 70: $
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

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