You are trying to decide how much to save for retirement. Assume you plan to save $4,000 per year with the first investment made one year from now. You think you can earn 7% per year on your investments and you plan to retire in 41 years, immediately after making your last $4,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $4,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 27 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 27th withdrawal (assume your savings will continue to earn 7% in retirement)? d. If, instead, you decide to withdraw $70,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings? e. Assuming the most you can afford to save is $800 per year, but you want to retire with $1,000,000.00 in your investment account, how high of a return do you need to earn on your investments? a. How much will you have in your retirement account on the day you retire? The amount in the retirement account in 41 years would be $ (Round to the nearest cent.)
You are trying to decide how much to save for retirement. Assume you plan to save $4,000 per year with the first investment made one year from now. You think you can earn 7% per year on your investments and you plan to retire in 41 years, immediately after making your last $4,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $4,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 27 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 27th withdrawal (assume your savings will continue to earn 7% in retirement)? d. If, instead, you decide to withdraw $70,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings? e. Assuming the most you can afford to save is $800 per year, but you want to retire with $1,000,000.00 in your investment account, how high of a return do you need to earn on your investments? a. How much will you have in your retirement account on the day you retire? The amount in the retirement account in 41 years would be $ (Round to the nearest cent.)
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
Related questions
Question
Transcribed Image Text:You are trying to decide how much to save for retirement. Assume you plan to save $4,000 per year with the first
investment made one year from now. You think you can earn 7% per year on your investments and you plan to retire in
41 years, immediately after making your last $4,000 investment.
a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $4,000 per year, you wanted to make one lump-sum investment today for your retirement that
will result in the same retirement saving, how much would that lump sum need to be?
c. If you hope to live for 27 years in retirement, how much can you withdraw every year in retirement (starting one year
after retirement) so that you will just exhaust your savings with the 27th withdrawal (assume your savings will continue to
earn 7% in retirement)?
d. If, instead, you decide to withdraw $70,000 per year in retirement (again with the first withdrawal one year
after retiring), how many years will it take until you exhaust your savings?
e. Assuming the most you can afford to save is $800 per year, but you want to retire with $1,000,000.00 in your
investment account, how high of a return do you need to earn on your investments?
a. How much will you have in your retirement account on the day you retire?
The amount in the retirement account in 41 years would be $
(Round to the nearest cent.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education