Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of 5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much should you set aside in order to meet this future increase in the cost of living for 25 years? O $428,985.67 O $1,128,200.66 O $699,214.99 O $34,960.75

Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of 5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much should you set aside in order to meet this future increase in the cost of living for 25 years? O $428,985.67 O $1,128,200.66 O $699,214.99 O $34,960.75

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

Retirement Investment Advisors Incorporated, has just offered you an annual interest rate of 6 percent until you retire in 40 years. You believe that interest rates will increase over the next year and you would be offered 6.6 percent per year one year from today. If you plan to deposit $18,000 into the account either this year or next year, how much more will you have when you retire if you wait one year to make your deposit?
Your insurance company offered you an annuity that pays you $100 at the end of each year. The life of the annuity is 10 years. Assume that market interest rate you can earn on similar risky investments is 8%. What should be the present value of this annuity? If you are given the first payment immediately starting today, what should be the worth of this annuity? Which payment mode will you accept? What will be basis of your decision under time value of money concept?
Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you have the money to pay for it. An annuity is basically the opposite of a fixed-installment loan: you deposit a fixed amount each month and receive interest based on the total amount that's been saved. The future value formula is: A = [( The future value would be $ 12M 1+ 12 Y where M is the regular monthly payment, r is the annual interest rate in decimal form, and t is the term of the annuity in years. If you chose an annuity with a term of two years at 4.7% and a monthly payment of $100, the future value would be $2511.27. Recalculate the future value amount if you're willing to raise your monthly payment $20 per month. Round your answer to the nearest cent. 121 X 6
Please answer using life-cycle problem. Suppose the interest rate is 5%, the income tax rate 35%, the tax rate on investment income is 20%, and the investment horizon 40 years. (a) What is the final payoff after tax if $100 pre-tax income is invested in a regular savings account? (b) What is the final payoff after tax if $100 pre-tax income is invested in a retirement account? (c) What is the final payoff after tax if $100 pre-tax income is invested in a Roth account?
Your insurance agent is trying to sell you an annuity that costs $50,000 today. By buying this annuity, your agent promises that you will receive payments of $260 a month for the next 25 years. What is the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
At the moment you don't have any money saved for retirement, but have resolved to start making $425 monthly payments (starting one month from today) into an account expected to earn an effective annual rate of 9.9%. Given that plan, how many years will it take for you to accumulate $2.4 million?
You are thinking of retiring. Your retirement plan will pay you either $200,000 immediately on retirement or $280,000 five years after the date of your retirement. Which alternative should you choose if the interest rate is: 0% per year, you should? 8% per year, you should? 20% per year, you should?
Suppose you purchased an annuity that pays $200 at the beginning of each year for 3 years. The interest rate is 4.4%. What is the present value of the annuity?
Many people get ready for retirement by depositing money into a monthly or annual savings plan. Solve, a. If $300 per month is deposited in a bank account paying a 6% APR compounded monthly, how much will be accumulated in the account after 30 years? b. If inflation is expected to average 2% per year into the foreseeable future, what is today’s equivalent spending power for your answer to Part (a)?

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