You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs).Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that. a. Therefore, how much do you need to save in TOTAL per month if you can earn 12% compounded monthly from now till you buy your house taking into account your retirement expenses? b. And how much do you need to save in TOTAL per month after you buy your house until you retire taking into account your retirement expenses?

You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs).Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that. a. Therefore, how much do you need to save in TOTAL per month if you can earn 12% compounded monthly from now till you buy your house taking into account your retirement expenses? b. And how much do you need to save in TOTAL per month after you buy your house until you retire taking into account your retirement expenses?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 8E

See similar textbooks

Related questions

Q: At what interest rate will you need to invest in the current IRA account balance in order to achieve…

Q: You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the…

A: A concept through which it is studied that the current worth of money is higher than its future…

Q: If you make annual payments into a retirement plan during your working life, how much will you need…

A: Find the present value of the annuity for retirement funds at t=25. (PV Function) The above amount…

Q: for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same…

A: An Annuity is a stream of regular periodic payments made or received for a specified period of time…

Q: Suppose you plan on retiring at the age of 35 (early retirement woooooooo!) and expect to live…

Q: You are 30 years old today. You want to retire at the age of 65. You expect to live until age 90.…

A: Retirement planning is quite necessary and that should be done based on time value of money and…

Q: A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which…

A: Time value of money is the concept widely followed by the management and many companies to determine…

Q: Suppose you are 20 years old and plan to retire at exactly 60 years old. you will need to withdraw…

A: The time value of money is a financial principle stating that a dollar today is worth more than a…

Q: You are making plans for your retirement. You have just turned 30 and want to retire on your 65th…

A: TVM refers to the capacity of money to earn interest because money earned earlier is considered more…

Q: How much do you need to contribute each year to fund your retirement?

A: Step-1:Calculate the present value at the age of 65 of withdrawl of cash after retirement to 100th…

Q: You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the…

A: First thing you have to calculate retirement amount needed and total amount at retirement.

Q: Suppose that Paolo is 45 years old and has no retirement savings. He wants to begin saving for…

A: Savings per year = $12,000Average annual return =8%Current age = 45 years

Q: How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement…

A: Information Provided: Fathers current age = 50 Years until retirement = 10 Years living in…

Q: You are saving for retirement. To live comfortably, you decide you will need to save $2,500,000 by…

A: To guarantee financial stability during retirement years is one of the main motivations for saving…

Q: You are graduating in two years and are thinking about your future. You know that you will want to…

A: FV is the future worth of cash flows that have occurred in the past or present.

Q: You are making plans for your retirement. You have just turned 30 and want to retire on your 65th…

A: in this we have to calculate the monthly payment required for retirement. from than annual…

Q: You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the…

A: Retirement expenses mean those expenses which are incurred during or after the retirement period.…

Q: You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the…

A: Given information: Total cost of house is $1,650,000 Down payment of $50,000 Retirement age is 64…

Q: Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he…

Q: You are making plans for your retirement. You have just turned 30 and want to retire on your 65th…

A: Given: Monthly income =$3000 Tax rate = 30% Value of retirement amount at the beginning of…

Question

You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs).Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that.

a. Therefore, how much do you need to save in TOTAL per month if you can earn 12% compounded monthly from now till you buy your house taking into account your retirement expenses?
b. And how much do you need to save in TOTAL per month after you buy your house until you retire taking into account your retirement expenses?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs). In addition you would like to offer yourself a retirement gift, a Mercedes that you would buy brand new to serve you through your retirement years. The car is expected to cost you $76,000. It will be purchased when you reach 64 years of age. Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that. How much should you save per month to be able to buy the car…
You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs). In addition you would like to offer yourself a retirement gift, a Mercedes that you would buy brand new to serve you through your retirement years. The car is expected to cost you $76,000. It will be purchased when you reach 64 years of age. Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that. How much should you save per month to be able to buy the car…
You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs). In addition you would like to offer yourself a retirement gift, a Mercedes that you would buy brand new to serve you through your retirement years. The car is expected to cost you $76,000. It will be purchased when you reach 64 years of age. Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that.How much should you save per month to be able to buy the house at…
You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your retirement you would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs). In addition you would like to offer yourself a retirement gift, a Mercedes that you would buy brand new to serve you through your retirement years. The car is expected to cost you $76,000. It will be purchased when you reach 64 years of age. Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that.Therefore, how much do you need to save in TOTAL per month if you…
You are planning for your retirement. You expect to earn a monthly salary of $7,000 starting on the 1st month after you retire, which will be able to provide comfortably for your daily expenses through your retirement years. You are currently 33 and plan on retiring when you become 64, and you expect to live 20 years after retirement. In addition to providing a salary for your would like to buy a house by the time you reach 55. The house you dream of would cost you $1,650,000. Now you have a down payment of $50,000 (ignore closing costs). In addition you would like to offer yourself a retirement gift, a Mercedes that you would buy brand new to serve you through your retirement years. The car is expected to cost you $76,000. It will be purchased when you reach 64 years of age. Assume you can earn 12% compounded monthly from now until you retire, and the rate will change to 6% monthly compounding after that. retirement you a) How much should you save per month to be able to buy the car…
Suppose you plan on retiring at the age of 35 (early retirement woooooooo!) and expect to live another 45 years to the age of 80. You estimate that you can comfortably live on an allowance of $4,000 per month (including housing and medical expenses) while not working in retirement. If you wanted to purchase an annuity that would make monthly payments of $4,000 to cover your monthly allowance for the 45 years of your retirement, approximately how much money would you need to have saved by the time you are 35 in order to purchase such an annuity if the annuity pays an APR of 3.6%? Group of answer choices $500,000 $100,000 $1 million $2.2 million
You are making plans for your retirement. You have just turned 30 and want to retire on your 65th birthday. Once retired, you plan to move to a tax-free Caribbean state, where you believe you can live comfortably on your retirement savings. You plan to make your first withdrawal from your retirement savings when you retire at age 65 and your last withdrawal one month before your 85th birthday. Based on family history, you expect to live until exactly age 85. Your plan is to have a total of $1 million when you retire. Your current salary is $36,000 per year, or $3,000 per month. Your personal tax rate is approximately 30%. You estimate that you can earn an average return of 12% APR compounded annually on any money you invest over the next 60 years. You want to start putting aside a fixed amount of money at the end of every month until your retirement at age 65. You will make your first deposit one month from now and your last deposit on your 65th birthday. Given that you have $1…
You are making plans for your retirement. You have just turned 30 and want to retire on your 65th birthday. Once retired, you plan to move to a tax-free Caribbean state, where you believe you can live comfortably on $10,000 per month. Your first payment of $10,000 will occur one month after you retire, and you will receive your last instalment from your retirement fund on your 85th birthday when you intend to move back to Canada and depend on your kids for support. Your current salary is $60,000 per year, or $5,000 per month. Your personal tax rate is approximately 25%. You estimate that you can earn an average return of 10% APR compounded monthly on any money you invest over the next 60 years. You will make your first deposit one month from now and your last deposit on your 65th birthday. To ensure that you are able to achieve your retirement objective, what percentage of your after-tax monthly. income must you save? Select one: a. 4.52% of after tax monthly income b. 5.46% of after…
You have estimated your future retirement income needs and, after taking Social Security into account, you have determined that you will have an pretax income shortfall of $100,000 in your first year of retirement at age 65. How much will you need to have saved by then, assuming you want to have your retirement income increase with inflation, but are willing to spend down your principal over time? Assume that you will live for 40 years in retirement, inflation will average 3% and you can earn 7% on your investments. (Hint: Use the inflation - adjusted annuity equation). You have estimated your future retirement income needs and, after taking Social Security into account, you have determined that you will have an pretax income shortfall of $100,000 in your first year of retirement at age 65. How much will you need to have saved by then, assuming you want to have your retirement income increase with inflation, but are willing to spend down your principal over time? Assume that you will…
i need the answer quickly
You are saving for retirement. To live comfortably, you decide you will need to save $3,000,000 in your RRSP by the time you are 65. Today is your 26th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into an RRSP account. If the interest rate is 3%, you set aside $39,787 each year to make sure that you will have $3,000,000 in the RRSP account on your 65th birthday. You realize that your plan has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 5% per year. Under this plan, how much will you put into the RRSP account today? (Recall that you are planning to make the first contribution to the RRSP account today.) The first payment is $ (Round to the nearest dollar.)
You are graduating in two years and are thinking about your future. You know that you will want to buy a house five years after you graduate and that you will want to put down $50,000. As of right now, you have 8,000 in your savings account. You are also fairly certain that once you graduate, you can go work in the family business and earn $32,000 a year, with a 5 percent raise every year. You plan to live with your parents for the first two years after graduation, which will enable you to minimize your expenses and put away $10,000 each year. The next three years, you will have to live out on your own, as your younger sister will be graduating from college and has already announced her plan to move back in the family house. Thus, you will only be able to save 13 percent of your annual salary. Assume that you will be able to invest savings from your salary at 7.2 percent. At what interest rate you need to invest the current savings account balance at in order to achieve your goal? (If…