You are 40 years old and want to retire at age 60. Each year, starting one year from now, you will deposit anequal amount into a savings account that pays 7% interest. The last deposit will be on your 60th birthday. Onyour 60th birthday you will switch the accumulated savings into a safer bank account that pays only 4% interest.You will withdraw your annual income of $140,000 at the end of that year (on your birthday) and eachsubsequent year until your 85th birthday. On that birthday you want to give $1,000,000 to your children. Howmuch do you have to save each year to make this retirement plan happen?

The time value of money acknowledges that, because of prospective earning potential, inflation, and…

Answered: subsequent year until your 85th…

subsequent year until your 85th birthday. On that birthday you want to give $1,000,000 to your children. How much do you have to save each year to make this retirement plan happen?

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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Similar questions

Your parents will retire in 26 years. They currently have $230,000 saved, and they think they will need $1,250,000 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.
Please help me. I dont understand the steps.
Your parents are planning to retire in 20 years. They currently have $1,000,000 and they would like to have $5,000,000 when they retire. What annual rate of interest would they have to earn on their $1,000,000 to reach their goal, assuming they save no more money?
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