You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $5,000 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 20 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 20th withdrawal (assume your savings will continue to earn 10% in retirement)? d. If, instead, you decide to withdraw $300,000 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 $1,000 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?
You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $5,000 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 20 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 20th withdrawal (assume your savings will continue to earn 10% in retirement)? d. If, instead, you decide to withdraw $300,000 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 $1,000 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?
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
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Transcribed Image Text:You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10%
per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment.
a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $5,000 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 20 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 20th withdrawal (assume your savings will continue to earn 10% in retirement)?
d. If, instead, you decide to withdraw $300,000 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 $1,000 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?
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