EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Chapter 4, Problem 46P
Summary Introduction
To determine: The percentage of income that has to be contributed by Person X every year in order to fund his retirement.
Introduction:
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Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to
meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of
5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living
cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much
should you set aside in order to meet this future increase in the cost of living for 25 years?
O $428,985.67
O S1,128,200.66
O $699,214.99
O $34,960.75
Suppose you plan on retiring at the age of 35 (early retirement woooooooo!) and expect to live another 45 years to the age of 80. You estimate that you can comfortably live on an allowance of $4,000 per month (including housing and medical expenses) while not working in retirement. If you wanted to purchase an annuity that would make monthly payments of $4,000 to cover your monthly allowance for the 45 years of your retirement, approximately how much money would you need to have saved by the time you are 35 in order to purchase such an annuity if the annuity pays an APR of 3.6%?
Group of answer choices
$500,000
$100,000
$1 million
$2.2 million
Question # 3:
Suppose that your retirement benefits during your first year of retirement are $50000. Assume that this
amount is just enough to meet your cost of living during the first year. However, your cost of living is
expected to increase at an annual rate of 5% due to inflation. Suppose you do not expect to receive any
cost-of-living adjustment in your retirement pension. Then some of your future cost of living has to
come from savings other than retirement pension. If your savings account earns 7% interest a year,
how much should you set aside in order to meet this future increase in the cost of living over 25 years?
Chapter 4 Solutions
EBK CORPORATE FINANCE
Ch. 4.1 - Prob. 1CCCh. 4.1 - Prob. 2CCCh. 4.2 - Prob. 1CCCh. 4.2 - Prob. 2CCCh. 4.2 - Prob. 3CCCh. 4.3 - Prob. 1CCCh. 4.3 - Prob. 2CCCh. 4.4 - Prob. 1CCCh. 4.4 - What benefit does a firm receive when it accepts a...Ch. 4.5 - How do you calculate the present value of a a....
Ch. 4.5 - How are the formulas for the present value of a...Ch. 4.6 - Prob. 1CCCh. 4.6 - Prob. 2CCCh. 4.7 - Prob. 1CCCh. 4.7 - Prob. 2CCCh. 4.8 - Prob. 1CCCh. 4.8 - Prob. 2CCCh. 4.9 - Prob. 1CCCh. 4.9 - Prob. 2CCCh. 4.A - Your grandmother bought an annuity from Rock Solid...Ch. 4.A - Prob. A.2PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 2PCh. 4 - Calculate the future value of 2000 in a. Five...Ch. 4 - Prob. 4PCh. 4 - Your brother has offered to give you either 5000...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Your daughters currently eight years old. You...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Suppose you receive 100 at the end of each year...Ch. 4 - You have just received a windfall from an...Ch. 4 - You have a loan outstanding. It requires making...Ch. 4 - You have been offered a unique investment...Ch. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - How would your answer to Problem 16 change if the...Ch. 4 - The British government has a consol bond...Ch. 4 - What is the present value of 1000 paid at the end...Ch. 4 - You are head of the Schwartz Family Endowment for...Ch. 4 - When you purchased your house, you took out a...Ch. 4 - Prob. 22PCh. 4 - Your grandmother has been putting 1000 into a...Ch. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 25PCh. 4 - You work for a pharmaceutical company that has...Ch. 4 - Your oldest daughter is about to start...Ch. 4 - A rich aunt has promised you 5000 one year from...Ch. 4 - You are running a hot Internet company. Analysts...Ch. 4 - Prob. 30PCh. 4 - Prob. 32PCh. 4 - Your firm spends 5000 every month on printing and...Ch. 4 - You have just entered an MBA program and have...Ch. 4 - Your credit card charges an interest rate of 2%...Ch. 4 - You have decided to buy a perpetuity. The bond...Ch. 4 - You are thinking of purchasing a house. The house...Ch. 4 - You would like to buy the house and take the...Ch. 4 - You have just made an offer on a new home and are...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - You are saving for retirement. To live...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - You are shopping for a car and read the following...Ch. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - The Tillamook County Creamery Association...
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