Years until retirement Amount to withdraw each year $90,000 Years to withdraw in retirement 30 Investment rate 20 8% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. a. If she starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals in retirement? b. Suppose your friend has inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump- sum deposit today to cover her retirement needs. What amount does she have to deposit today? c. Suppose your friend's employer will contribute to the account each year as part of the company's profit-sharing plan. In addition, your friend expects a distribution from a family trust several years from now. What amount must she deposit annually now to be able to make the desired withdrawals in retirement? The details are:

Years until retirement Amount to withdraw each year $90,000 Years to withdraw in retirement 30 Investment rate 20 8% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. a. If she starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals in retirement? b. Suppose your friend has inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump- sum deposit today to cover her retirement needs. What amount does she have to deposit today? c. Suppose your friend's employer will contribute to the account each year as part of the company's profit-sharing plan. In addition, your friend expects a distribution from a family trust several years from now. What amount must she deposit annually now to be able to make the desired withdrawals in retirement? The details are:

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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TIME VALUE OF MONEY CALCULATIONS 1.Tafadzwa and Lindiwe plan to retire at age 60 with a retirement income of $48,000 a year from their savings. Rather than pay themselves the whole amount at the beginning of each year, they have decided that payment at the beginning of each quarter of $12,000 gives them the right balance of flexibility and maximized interest earnings. They feel they can safely earn an interest rate of 7.5%, compounded quarterly, on their money and they are budgeting based on the prediction that they will live until they are 90 years old. a.1)How much money will they have to have saved by the time they are 60 in order to reach their retirement goal? a.2)If they do live the full 30 years, and spend their full quarterly budget, how much money in total will they have lived on/spent in their retirement? a.3)How much will have been earned in interest? a.4)If they saved the same total amount of their own money, but no interest earned over the years whatsoever, how much…

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