Question 2: Jenny is 23 years old today (this is time 0). She is hoping to retire at age 62 (exactly on her 62nd birthday) and actuarial tables suggest that she is likely to live until the age of 86. She wants to move to an area with a warmer climate upon retirement on her 62nd birthday. The move is estiamted to cost $25,000. Starting on 62nd birthday and ending on 85th birthday (all withdrawals are at the beginning of the year), a withdrawal of $30,000 per year will be made to meet annual living expenses.

Assume interest rate to be 6.75% for all calculations. What is the total amount required on the 62nd birthday so that this amount can be used to meet all the expenditures in retirement years? Use the timeline method to find the answer. (15)

What is the present value (i.e., value at year 23) of the required savings calculated in part a? (4)

To attain the retirement goal, Jenny is planning to save an equal amount each year starting from today. The last savings will be made on her 61st birthday. How much needs to be saved each year? (4)