5-41B. (Comprehensive present value) You have just inherited a large sum of money and you are trying to determine how much you should save for retirement and how much you can spend now. For retirement you will deposit today Oanuary 1, 2005) a lump sum in a bank account paying 10 percent compounded annually. You don't plan on touching this deposit until you retire in five years GaImary 1,2010), and you plan on living for 20 additional years and then drop dead on December 31,2029. During your retirement, you would like to receive income of $60,000 per year to be rdeived the first day of each year, with the first payment on January 1,2010, and the last payment onJanuary 1, 2029. Complicating this objective is your desire to have one final three-year fling, during which time you'd like to track down all the original members of The Mr. Ed Show and The Mrmkees and get their autographs. To finance this, you want to receive $300,000 onJanuary 1, 2025, and lwthing on January 1, 2026, and January 1,2027, as you will be on the road. In addition, after you pass on Oanuary 1,2030), you would like to have a total of $100,000 to leave to your children.

a.ı How much must you deposit in the bank at 10 percent on January 1,2005, in order to achieve your goal? (Use a time line in order to answer this question.)

b. \\That kinds of problems are associated with this analysis and its assumptions?