Video Excel Online Structured Activity: Required annuity payments Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $40,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $235,000 saved, and he expects to earn 7% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent. $ 92,261.76 Check My Work Reset Problem 1 Required annuity payments 2 3 Retirement income today 4 Years to retirement 5 Years of retirement 6 Inflation rate 7 Savings 8 Rate of return 9 10 Calculate value of savings in 10 years: $40,000 10 25 5.00% $235,000 7.00% 15 16 11 Savings att = 10 12 13 years: Calculate value of fixed retirement income in 10 14 Retirement income at t = 10 Calculate value of 25 beginning-of-year retirement payments at t=10: ($462,280.57) Formulas |=FV(B8,B4,0,B7) ($65,155.79) =FV(B6,B4,0,B3) 17 Retirement payments at t = 10 $812,449.25 =PV(B8,B5,B14,0,1) 18 19 Calculate net amount needed at t = 10: 20 Value of retirement payments $812,449.25 =B17 21 Value of savings 22 Net amount needed ($462,280.57) $1,274,729.82 =B11 =B20-B21 23 24 Calculate annual savings needed for next 10 years: 25 Annual savings needed for retirement $92,261.76 =-PMT(B8, B4,0,B22) 26 61 27
Video Excel Online Structured Activity: Required annuity payments Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $40,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $235,000 saved, and he expects to earn 7% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent. $ 92,261.76 Check My Work Reset Problem 1 Required annuity payments 2 3 Retirement income today 4 Years to retirement 5 Years of retirement 6 Inflation rate 7 Savings 8 Rate of return 9 10 Calculate value of savings in 10 years: $40,000 10 25 5.00% $235,000 7.00% 15 16 11 Savings att = 10 12 13 years: Calculate value of fixed retirement income in 10 14 Retirement income at t = 10 Calculate value of 25 beginning-of-year retirement payments at t=10: ($462,280.57) Formulas |=FV(B8,B4,0,B7) ($65,155.79) =FV(B6,B4,0,B3) 17 Retirement payments at t = 10 $812,449.25 =PV(B8,B5,B14,0,1) 18 19 Calculate net amount needed at t = 10: 20 Value of retirement payments $812,449.25 =B17 21 Value of savings 22 Net amount needed ($462,280.57) $1,274,729.82 =B11 =B20-B21 23 24 Calculate annual savings needed for next 10 years: 25 Annual savings needed for retirement $92,261.76 =-PMT(B8, B4,0,B22) 26 61 27
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:Video
Excel Online Structured Activity: Required annuity payments
Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at
the time he retires as $40,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today,
at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $235,000 saved, and he expects to earn 7% annually on his savings. The
data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
X
Open spreadsheet
How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest
cent.
$
92,261.76
Check My Work
Reset Problem
Transcribed Image Text:1 Required annuity payments
2
3 Retirement income today
4 Years to retirement
5 Years of retirement
6 Inflation rate
7 Savings
8 Rate of return
9
10 Calculate value of savings in 10 years:
$40,000
10
25
5.00%
$235,000
7.00%
15
16
11 Savings att = 10
12
13
years:
Calculate value of fixed retirement income in 10
14 Retirement income at t = 10
Calculate value of 25 beginning-of-year retirement
payments at t=10:
($462,280.57)
Formulas
|=FV(B8,B4,0,B7)
($65,155.79)
=FV(B6,B4,0,B3)
17 Retirement payments at t = 10
$812,449.25
=PV(B8,B5,B14,0,1)
18
19 Calculate net amount needed at t = 10:
20 Value of retirement payments
$812,449.25
=B17
21 Value of savings
22 Net amount needed
($462,280.57)
$1,274,729.82
=B11
=B20-B21
23
24 Calculate annual savings needed for next 10 years:
25 Annual savings needed for retirement
$92,261.76
=-PMT(B8, B4,0,B22)
26
61
27
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