1) Your friend needs your help for retirement planning. The following information is what you gather from your conversations.

She wants to retire at 65. Her financial goal is to save enough money before then, so she can enjoy a living standard of $80,000 a year for 25 years.

Her employer provides a 401 account. She will contribute a fixed amount of money each yearfor 30 years to the account. Currently she has no money in the account and herfirst contribution will be made in a year.

You think an annual expected return of 8% on her retirement saving is reasonable. On the day she retire, she needs to withdraw all the money from the account. You suggest her to retain $80,000 for the first year living expense and use the rest money to buy an annuity, which can pay her $80,000 at the end of each year for the rest 24 years. In other words, the saving should be enough to provide 25 annual payments of $80,000, with the first paymentdue immediatelyon the day she retires. The expected interest rate on the annuity is 3.5%.

You need to figure out her required annual contribution to 401 account in order to reach her financial goal.

Which of the following statements is correct?

Select one:

a.She needs $80,000 per year for 25 years, so the total saving she needs to accumulate is80,000*25=$2 million.

b.She needs to save $66,667 each year because $80,000*25 over 30 years is $66,667.

c.To get the final answer, the first step is to use the FV of annuity due formula to calculate the total amount needed for retirement.

d.The total amount needed for the 25-year retirement period,is also the target future value in 30- year investing period.

2) Continued with previous question.

What is total amount needed on the day she retires?

Select one:

$1,352,330.26

$1,364,669.41

$2,000,000

$1,400,258.75

$1,388,947.05

3) To be able to afford her desired retirement living, her goal of total saving in 30 years is $___________.

(DO NOT include thousand separator comma in number, answer rounded with two decimals)

4) Continued with previous question. What is her required annual saving at the end of each year?

Select one:

$13,005.27

$12,688.72

$12,046.53

$12,632.45