David is a client at your firm and you are asked to work with David. Today is Davids 22ndbirthday. David is single, has a $50,000 annual household income, and currently has no current retirement savings. David wants you to complete a retirement analysis for him and to exclude social security in the analysis. David plans to retire on his 67th birthday and plans to live to his 90th birthday. In retirement David plans to withdraw $40,000 annually from his personal retirement account. Assume the following for Davids personal retirement account: (i) his first contribution will be on his 23rd birthday and his last contribution will be on his 67th birthday; (ii) his first withdrawal will be on his 67th birthday and his last withdrawal will be on his 90th birthday; (iii) his account will earn an 7 percent annual rate of return before retirement; (iv) his retirement account will earn a 6 percent annual rate of return during retirement; and (v) he will make contributions and withdrawals annually (not monthly).

1. Your first task is to explain to David how much money he will need in his personal retirement account when he retires.a. Draw a time line with all the appropriate information. The time line must show only numbers unless it is an unknown variable in which case you can show it as a question mark (?).

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b. How much money does David need in his personal retirement account when he retires to achieve his retirement goals? Explain your answer.

2. Your second task is to explain to David how much money he must contribute each year to his retirement account while he is working. Assume all the contributions will be the same amount or equal payments. a. Draw a time line with all the appropriate information. The time line must show only numbers unless it is an unknown variable in which case you can show it as a question mark (?).

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b. How much money must David contribute to his retirement account each year to achieve his retirement goals? Explain your answer.