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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Question
12.
![You have just turned 22 years old, received your bachelor's degree, and accepted your first job. Now you must decide how much
money to put into your retirement plan. The plan works as follows: Every dollar in the plan earns 6.6% per year. You cannot
make withdrawals until you retire on your 65th birthday. After that, you can make withdrawals as you see fit. You decide that you
will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $120,000 per
year, starting at the end of the first year of retirement and ending on your 100th birthday. You will contribute the same amount to
the plan at the end of every year that you work. How much do you need to contribute each year to fund your retirement?
[Note the "Show Work" button at the bottom - you can type in your answer or upload an image to show your work for possible
partial credit. Explaining/showing your work is NOT required, but in case you get the answer wrong, it may justify my giving you
partial credit. Please explain/label your steps clearly (you don't need to explain as if to someone who doesn't know how to work
the problem; just communicate to me what you are doing). Make it clear what r and n you are using.]
Your annual contribution should be $. (Round to the nearest cent.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf4af336-0fbd-4b86-ad58-139fa69a7ad6%2Fa7351671-c5f9-4293-8e69-af230dbe5e92%2Fronekh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have just turned 22 years old, received your bachelor's degree, and accepted your first job. Now you must decide how much
money to put into your retirement plan. The plan works as follows: Every dollar in the plan earns 6.6% per year. You cannot
make withdrawals until you retire on your 65th birthday. After that, you can make withdrawals as you see fit. You decide that you
will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $120,000 per
year, starting at the end of the first year of retirement and ending on your 100th birthday. You will contribute the same amount to
the plan at the end of every year that you work. How much do you need to contribute each year to fund your retirement?
[Note the "Show Work" button at the bottom - you can type in your answer or upload an image to show your work for possible
partial credit. Explaining/showing your work is NOT required, but in case you get the answer wrong, it may justify my giving you
partial credit. Please explain/label your steps clearly (you don't need to explain as if to someone who doesn't know how to work
the problem; just communicate to me what you are doing). Make it clear what r and n you are using.]
Your annual contribution should be $. (Round to the nearest cent.)
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