Hello,

My question is simply: If somebody can understand WHERE he got $56,818.18 for PMT (Payment), we're done.

All help appreciated.

So this question asks you to "show the effects of different investment asset mixes for retirement at age 60 and 65"

1) Retirement at 60, low return investment mix at 2%

Here are the benefits they can receive (data from online)

CPP: $1,134.17 x 12 months x 2 people

OAS: $596 x 12 months x 2 people

= $41,524.08

In retirement, they would like an after-tax income of $50,000 per annual.

= after-tax $25,000 for each person (husband and wife)

This is the average tax rate during retirement: $27,500 at 6.5% = $25,712

Which means they need: $55,000 ($27,500 x 2)

But they have from CPP+OAS = 41,524.08

GAP: $13,475.922 ($55,000 - $41,524. 08)

So next thing is:

N= 25 (60-35)

I/Y = 2%

PMT = 13,475. 92

PV = ? $263,096.54 (B)

This means that they must accumulate $263,096.54 by the time they reach age 60 to achieve their retirement goal

Everything from here I understand, but the following I dont:

The professor goes on:

If somebody can understand WHERE he got $56,818.18 for PMT, then we're done.

N= 5

PMT = $56,818.18

I/Y = 2%

PV = ? $267,810.2 (A)

Professor goes on...

N = 5

I/Y = 2%

FV = 263, 096.54 (B)

PV = ? $238, 294.64

A + B = $506,104.84 = RRSP

Elizabeth Maynes wants to plan how much she and her husband Bruce should save for retirement. They have no pension plans because she is an independent consulting economist and he owns his own computer company Both have contributed the maximum to the Canada Pension Plan so far, and they expect to earn enough to continue to do so. They live in Hamilton, Ontario, and plan to retire in Ontario. They are now 35 years old and would like to retire at age 60, but they are not sure if they will have saved enough. They are willing to work until age 65 if they can get a more secure retire- ment that way. In retirement, they would like an after-tax income $50,000 p.a., expressed in today's dollars and with no reduction when one of them dies. Elizabeth has $5,000 in an RRSP, which is invested in a GIC. Bruce has $10,000 in a Latin America mutual fund. They each have $15,000 in a TFSA. They plan to keep the TFSAs invested in riskless government bonds that they expect to show a real return of 2% pa. The TFSAs are their emergency funds; though they expect to spend the money sometime after they retire, they do not want to invest in anything riskier, despite the higher returns that might be possible. They plan to do all of their future saving in RRSPs, but they are unsure of the effects of different investment choices on their retirement and they would like your advice. Show them the effects of different investment asset mixes for retiremen at age 60 and 65 on the amount that they must save each year, in re lars. Assume that they take CPP and OAS at the normal start date, Ta than taking CPP early or delaying the start of either one. Use the 20 for CPP and OAS. State your assumptions clearly. They will not receive age and pension tax credits at age 60. Table 17.1 only applies to a person 65 Use a tax rate of 12% for age 60-65 in your calculations. Discuss underlying the different choices of asset mix and retirement age rather values the the risk