Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need D please On January 1, Bob just reached age 30. He earned $90,000 at the end of last year. It is assumed that his

need D please image text in transcribed
On January 1, Bob just reached age 30. He earned $90,000 at the end of last year. It is assumed that his salary will grow at 1% each year and is paid at the end of each year. Bob would like to retire when he reaches 65 (35 years from today) and expects to live 23 years after retirement. After some basic analysis, you estimate that wage replacement ratio will be 75%. After retirement, the retirement need will grow by inflation rate 2% per year and is paid at the beginning of each year. The investment return (discount rate) is 8%. Keep four decimals if applicable. Please show all your work and inputs for full/partial credits. Points will be deducted if you fail to show how you derive the final answers even the answers are correct. (a). What's the amount of first year retirement need? (8 points) (b). What's the present value of all future retirement needs after retirement at age 65, assuming that he needs the retirement funding at theyinning of each year in retirement? (please show your inputs such as N, PMT, and etc.) (7 points) (c). How much is the present value of all retirement needs as of today ? (5 points) (d). What is the present value of all his future earnings as of today? Assuming all salaries are paid at the end of each year (please show your inputs such as N, PMT, and etc.) (7 points) (e). What should be his annual saving rate to meet the retirement needs? (3 points) Please type your answers to question (a), (b), (c), (d) and (e) below

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

Investments Analysis And Management

Authors: Charles Jones, Nick Jones

11th Edition

0470477121, 9780470477120

More Books

Students also viewed these Finance questions

Question

How do you communicate intimacy nonverbally?

Answered: 1 week ago