1. Kathy is planning for her retirement. She plans to retire 35 years from now and wants to be able to withdraw at least $12,000 per month over the following 25 years (300 withdrawals) during her retirement. Kathy believes she can earn 8% per year compounded monthly. How much does she need to save each month starting a month from now to afford the above retirement income?

2. Kathy is considering two other savings options. Option (a) would require her to make annual payments and it will pay 8.5% per year, and option (b) would require her to make weekly payments and it will pay 7.9% per year. Which of the three options (8% monthly, 8.5% annual, or 7.9% weekly) is better and why?
3. Kathy wants to buy a new car. The list price for Tesla Model Y is $100,000. Tesla offers 0% financing for 8 years on the list price with monthly payments. Also, it offers an 8-year lease option. It calls for a down payment of $5,000, monthly payments of $875 with the option to buy the car for $12,000 at the termination of the lease? The market rate of interest for 96-month car loans is 4% per year.

1. Which option (lease or 0% financing) should Kathy use?

2. What should be the purchase option amount to make the two deals equal?

4. Kathy wants to renovate the bathroom and the kitchen in her home and is talking to a bank about securing a 2-year loan. The renovations will cost $60,000. The bank is willing to lend her the full amount at 5% per year. The monthly payments on this loan will consist of the same fraction (1/24) of the principal plus interest on the outstanding balance. What will be the first 3 payments on this loan?
5. What is the effective annual return (EAR) of a savings account that pays 4% per year compounded continuously?