Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $28,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 15 years at an estimated cost of $641,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $650,000 to his nephew Frodo. He can afford to save $1,700 per month for the next 15 years.

Required:

If he can earn a 12 percent EAR before he retires and a 9 percent EAR after he retires, how much will he have to save each month in years 16 through 30?

$6,675.56

$5,049.76

$6,320.56

$5,152.82

$5,255.87