Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has $220,000 saved, and he expects to earn 7% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has $220,000 saved, and he expects to earn 7% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
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
Excel Online Structured Activity: Required annuity payments
Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has $220,000 saved, and he expects to earn 7% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent.
$ fill in the blank 2
Transcribed Image Text:811
fx
A
B.
G
Required annuity payments
Retirement income today
$45,000
Years to retirement
10
Years of retirement
5.
6.
Savings
25
Inflation rate
3.00%
7.
Rate of return
$220,000
8.
7.00%
9.
Calculate value of savings in 10 years:
11 Savings at t = 10
10
Formulas
#N/A
12
13
Calculate value of fixed retirement income in 10 years:
14
Retirement income at t = 10
#N/A
15
Calculate value of 25 beginning-of-year retirement
16 payments at t=10:
17 Retirement payments att 10
#N/A
18
19
Calculate net amount needed at t = 10:
#N/A
20 Value of retirement payments
Value of savings
21
#N/A
22
Net amount needed
#N/A
23
Calculate annual savings needed for nert 10 vears:
= A Sheet1
Calculation Mode: Automatic
Workbook Statistics
1234
Transcribed Image Text:9Search (Alt +O
File
Home
Insert
Draw
Page Layout
Formulas
Data
9v自v<
Review
View
Help
Editing
Arial
v 10
B B A-
E 22
Merge
Currency
...
811
fr
D
G.
13 Calculate value of fixed retirement income in 10 years:
14 Retirement income at t = 10
#N/A
15
Calculate value of 25 beginning-of-year retirement
16 payments at t=10:
17 Retirement payments at t = 10
#N/A
%3D
18
19
Calculate net amount needed at t = 10:
#N/A
20 Value of retirement payments
Value of savings
#N/A
21
#N/A
22
Net amount needed
23
Calculate annual savings needed for next 10 years:
Annual savings needed for retirement
24
#N/A
25
26
27
28
29
30
31
32
33
34
35
A Sheet1
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
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.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