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Assume that you have just turned 21, graduated from college, and got a great job. Because of a finance class that you took as an
Assume that you have just turned 21, graduated from college, and got a great job. Because of a finance class that you took as an undergraduate, you are now planning for your retirement. You have pulled together the following facts and have made the following assumptions: Your parents are giving you $15,000 as a graduation present to purchase a new car. Instead, you plan to spend $2,000 on a vacation, $7,000 on a used car, and to invest the remaining $6,000, starting today (Year 0), in your retirement account. In addition to the $6,000 above, you have saved your money over time and already had $25,000 in your retirement account (Year 0). You assume that you will get married in 4 years (Year 4 at age 25) and plan on spending $2,000 from your retirement account on your wedding. You assume that you will buy a house in 9 years (Year 9 at age 30) and plan on taking a down payment of $20,000 from your retirement account. You would like to retire in 30 years (Year 30 at age 51) and assume that you will need to withdraw $50,000 in each of Years 30 through 59 (the 30-year span from age 51 through age 80) from your retirement account. You believe that you can earn a nominal annual rate of return of 11 percent (compounded annually). Given the information above, and assuming that you make no other deposits to your retirement account, determine how much you will have left at Year 59 (age 80) after you make your last withdrawal of $50,000
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