You are 25 and plan on retiring at the end of forty years when you are 65. To save for retirement, you plan on making equal deposits at the end of each of the 40 years in an account that always earns 7.5% (before and after you retire). You want to have accumulated enough money when you are 65 so that you can withdraw $150,000 at the end of each year for twenty consecutive years (and then you die at 85 with no money left and you have no kids). How much do you need to deposit each of the next forty years (the "PMT") to build up enough savings to retire at 65?
You are 25 and plan on retiring at the end of forty years when you are 65. To save for retirement, you plan on making equal deposits at the end of each of the 40 years in an account that always earns 7.5% (before and after you retire). You want to have accumulated enough money when you are 65 so that you can withdraw $150,000 at the end of each year for twenty consecutive years (and then you die at 85 with no money left and you have no kids). How much do you need to deposit each of the next forty years (the "PMT") to build up enough savings to retire at 65?
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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You are 25 and plan on retiring at the end of forty years when you are 65. To save for retirement, you plan on making equal deposits at the end of each of the 40 years in an account that always earns 7.5% (before and after you retire). You want to have accumulated enough money when you are 65 so that you can withdraw $150,000 at the end of each year for twenty consecutive years (and then you die at 85 with no money left and you have no kids).
How much do you need to deposit each of the next forty years (the "PMT") to build up enough savings to retire at 65?
Transcribed Image Text:You are 25 and plan on retiring at the end of forty years when you are 65. To save
for retirement, you plan on making equal deposits at the end of each of the 40 years
in an account that always earns 7.5% (before and after you retire). You want to have
accumulated enough money when you are 65 so that you can withdraw $150,000 at
the end of each year for twenty consecutive years (and then you die at 85 with no
money left and you have no kids).
How much do you need to deposit each of the next forty years (the "PMT") to build
up enough savings to retire at 65?
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