The amount that has to be contributed by Person X every year in order to fund his retirement. Introduction: The present value is an amount that an individual has to make an investment at present in order to generate the cash flow in future. The present value of the cash flows can be computed by adding the cash flow of every stream.

Question

Want to see the full answer?

Answer 1

Question

Chapter 4, Problem 45P

Summary Introduction

To determine: The amount that has to be contributed by Person X every year in order to fund his retirement.

Introduction:

The present value is an amount that an individual has to make an investment at present in order to generate the cash flow in future. The present value of the cash flows can be computed by adding the cash flow of every stream.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

You have just turned 30 years old, have just received your MBA, and have 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 8% per year. You cannot make withdrawals until you retire on your 70th birthday. After that point, you can make withdrawals as you see fit. You decide that you will plan to live to 100 and work until you turn 70. You estimate that to live comfortably in retirement, you will need $100,000 per year starting at the end of the first year of retirement and ending on your one hundredth 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?

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 $125,000 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?

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 7.5% 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 $100,000 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? Your annual contribution should be $______________________ (Round to the nearest cent.)