1. Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $24,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 15 years at an estimated cost of $645,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $550,000 to his nephew Frodo. He can afford to save $2,200 per month for the next 15 years

Required:

If he can earn a 9 percent EAR before he retires and a 7 percent EAR after he retires, how much will he have to save each month in years 16 through 30?

A. $9,279.79

B. $8,115.05

C. $8,920.02

D. $7,952.75

E. $8,277.35

2. What is the present value of $1,900 per year, at a discount rate of 8 percent, if the first payment is received 5 years from now and the last payment is received 30 years from now?

A. $14,907.93

B. $3,965.68

C. $20,638.96

D. $15,096.75

E. $14,794.81