the bank compounding, How long will Personal Finance Problem Funding your retirement You plan to retire in exactly 20 years. Your goal is to cre ate a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you that you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year ing the 30-year retirement period. a. How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity? b. How much will you need today as a single amount to provide the fund calcu- lated in part a if you earn only 9% per year during the 20 years preceding re- tirement? dur- c. What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a and b? Explain. retire- d. Now assume that you will earn 10% from now through the end of ment. You want to make 20 end-of-year deposits into your retirement account that will fund the 30-year stream of $20,000 annual annuity payments. How large do your annual deposits have to be? your
the bank compounding, How long will Personal Finance Problem Funding your retirement You plan to retire in exactly 20 years. Your goal is to cre ate a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you that you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year ing the 30-year retirement period. a. How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity? b. How much will you need today as a single amount to provide the fund calcu- lated in part a if you earn only 9% per year during the 20 years preceding re- tirement? dur- c. What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a and b? Explain. retire- d. Now assume that you will earn 10% from now through the end of ment. You want to make 20 end-of-year deposits into your retirement account that will fund the 30-year stream of $20,000 annual annuity payments. How large do your annual deposits have to be? your
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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Transcribed Image Text:the bank
compounding, How long will
Personal Finance Problem
Funding your retirement You plan to retire in exactly 20 years. Your goal is to cre
ate a fund that will allow you to receive $20,000 at the end of each year for the 30
years between retirement and death (a psychic told you that you would die exactly
30 years after you retire). You know that you will be able to earn 11% per year
ing the 30-year retirement period.
a. How large a fund will you need when you retire in 20 years to provide the
30-year, $20,000 retirement annuity?
b. How much will you need today as a single amount to provide the fund calcu-
lated in part a if you earn only 9% per year during the 20 years preceding re-
tirement?
dur-
c. What effect would an increase in the rate you can earn both during and prior to
retirement have on the values found in parts a and b? Explain.
retire-
d. Now assume that you will earn 10% from now through the end of
ment. You want to make 20 end-of-year deposits into your retirement account
that will fund the 30-year stream of $20,000 annual annuity payments. How
large do your annual deposits have to be?
your
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