Someday you hope to retire and have $200,000 of income a year in today's dollars. You want tofund 25 years of retirement. During retirement, your investments will earn 4% annually. In the 30years before retirement, your investments will earn 9% annually. The estimated inflation rate overthe entire period is 3% annually. Assuming all payments are at the end of the period and that allnumbers are given in nominal terms unless otherwise stated. How much do you have to saveannually during the 30 years before retirement to achieve your goal?

To solve this problem, we need to use the concept of future value and present value of an annuity.…

Answered: Someday you hope to retire and have…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

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Similar questions

You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
You have decided you would like to deposit $5,000 into your account today and not touch it until you retire in 45 years. You would like to have accumulated $80,000 at retirement from this deposit if your savings account pays interest quarterly. a)What would your nominal required rate of return (% per annum) be on this deposit? b)What would your effective annual rate of return be on this deposit?
You estimate that by the time you retire in 35 years, you will have accumulated savings of $2.3 million. a. If the interest rate is 9.5% and you live 15 years after retirement, what annual level of expenditure will those savings support? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.) Annual expenditure $ Real annual expenditure 293,809.56 b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 4% inflation rate and work out a spending program for your $2.3 million in retirement savings that will allow you to increase your expenditure in line with inflation. What will be your expenditure amount in real terms for each year of your retirement? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.)
In order to fund your retirement, deposit of RM X can be made into an account today. This retirement plan wishes to pay RM100, in real terms, for 15 years, with first payment occurring 6 years from now. The inflation rate would be 0.0% for the next 5 years and 1.5% per annum thereafter. The annual effective rate of return is 6.8%. Calculate X. Please explain in details and state what formula did use on how to solve the problem
You want to be able to withdraw $12,000.00 from your account each quarter for 30 years after you retire.You expect to retire in 15 years.If your account earns 8% interest compounded quarterly, how much will you need to deposit each quarter until retirement to achieve your retirement goal?You will need to deposit $_______ each quarter.

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