Question
9.) Your friend is celebrating her 28th birthday and wants to start saving for her retirement at age 55. She wants to be able to
9.) Your friend is celebrating her 28th birthday and wants to start saving for her retirement at age 55. She wants to be able to withdraw $11000 from her savings account on each birthday for 10 years following her retirement (the first withdrawal on her 56th birthday). She intends to invest her money in a savings bank offering 7% (EAR) interest per year.
a. Suppose she won the lottery today and decided to make one lump sum payment today to cover her retirement needs (no other deposits to be made). What amount would she need to deposit today?
b. Suppose she wants to make 22 equal deposits to cover her retirement needs. She plans to start making these deposits on her 29th birthday and continues to make deposits on every birthday until she is 51 (last deposit on her 51st birthday). The only exception is she will skip the deposit on her 40th birthday. What is the minimum amount of these equal payments?
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