Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume you are now 2 1 years old and will start working as soon as you graduate from college. You plan to start saving for

Assume you are now 21 years old and will start working as soon as you graduate from college. You plan to start saving for your
retirement on your 25 th birthday and retire on your 65th birthday. After retirement, you expect to live at least until you are 85. You
wish to be able to withdraw $48,000(in today's dollars) every year from the time of your retirement until you are 85 years old (i.e., for
20 years). The average inflation rate is likely to be 5 percent.
Problem 6.42(a)
Your answer is correct.
Calculate the lump sum you need to have accumulated at age 65 to be able to draw the desired income. Assume that the annual
return on your investments is likely to be 10 percent. (Round answer to 2 decimal places, e.g.15.25. Round intermediate value to 3
decimal places, e.g.359400.312. Do not round factor values.)
Lump sum amount accumulated at age 65$
eTextbook and Media
Attempts: unlimited
Problem 6.42(b)
Your answer is correct.
What is the dollar amount you need to invest every year, starting at age 26 and ending at age 65(i.e., for 40 years), to reach the
target lump sum at age 65?(Round factor values to 4 decimal places, e.g.1.5212 and final answer to 2 decimal places, e.g.1,525.12.) now answer part a. and b. assuming the rate of return to be (i)8 percent per year and (ii)15 percent per year lump sum needed at age 65 and annuity payment needed
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Handbook Of Energy Trading

Authors: Stefano Fiorenzani, Samuele Ravelli, Enrico Edoli

1st Edition

1119953693, 978-1119953692

More Books

Students also viewed these Finance questions

Question

Are there any questions that you want to ask?

Answered: 1 week ago