As a financial planner, you are consulting with Bob, who is 60 years old now, about providing for his retirement income. Upon retiring at age 67, he wishes to have $60,000 per annum to spend each year for 20 years. A discount rate of 12% applies to valuing this retirement income. Bob wants you to tell him how much he has to place into a savings account each year, to fund his retirement in 7 years time and a discount rate of 4% applies to valuing these annual deposits. Before you proceed with your calculation, in further information you have to consider, Bob also has a lump sum of $25,000 now that can be invested for the 7 years till retirement, at 4% p.a. interest paid annually. The accumulation of this investment at retirement, reduces the total value of retirement income needed at age 67 and so will reduce the amount needed to be saved each year to fund retirement.

The total present value of Bob's retirement income at age 67 is

a/ 601,946.91

b/ 701,946.91

c/ 801,946.91

d/ 448,166.62

The future value of Bob's $25,000 lump sum investment at age 67 is

a/ 52,898.29

b/ 43,898.29

c/ 32,898.29

d/ 23,898.29

The amount needed to be saved each year to fund Bob's retirement, considering his $25,000 investment, is

a/ 49,491.01

b/ 52,576.96

c/ 36,491.01

d/ 64,491.01