Objective: Apply the concept of time value of money to solve various mathematical problems.

Submit this in Excel. Use the functionality of Excel and highlight your answers. Your work will be visible when you click on the answer, the formula that your used will show in the tool bar.

Determine how much money Terry needs to save per year for retirement. Terry is currently 35 years old, plans to retire at 70 and expects to live until 85. He would like to have $85,000 a year in retirement income. He assumes an annual return of 7% which includes the effects of inflation. He plans on annual deposits and withdrawals at the end of the year.

• Part A. What is the total amount that he needs to have in savings when he retires?

  • Hint: Look at how many years he expects to be retired and how much income he wants per year.

  • Ask yourself how often are the payments being made and when will he have the total amount?

  • This will help you determine if this is a lumpsum or annuity problem and if it is a present value or future value problem.

• Part B. Once you have the amount that he needs at age 70, determine how much does he need to save per year until he retires?

  • Hint: remember the impact of compounding and the questions to ask yourself.

MUST BE IN EXCEL AND USE EXCEL FORMULAS