Question Help You are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to withdraw $220,000 per year for the next 40 years (based on family history, you think you will live to age 80). You plan to save by making 15 equal annual installments (from age 25 to age 40) into a fairly risky investment fund that you expect will earn 12% per year. You will leave the money in this fund until it is completely depleted when you are 80 years old. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. How much money must you accumulate by retirement to make your plan work? (Hint: Find the present value of the $220,000 withdrawals.) (Round your final answer to the nearest whole dollar.) To make the plan work, you must accumulate $ by retirement Requirement 2. How does this amount compare to the total amount you will withdraw from the investment during retirement? How can these numbers be so different? Over the course of your retirement you will be withdrawing $ However, by age 40 you only need to have invested These numbers are different because: O A. You need to have the same amount accumulated as you will withdraw because you will not earn further interest on your investment when you reach retirement. O B. You need to have far more accumulated than what you will withdraw because you will withdraw a large portion of the investment every yearthe balance remains invested where continues to earn 12% interest. OC. You need to have far less accumulated than what you will withdraw because you only withdraw a portion of the investment every yearthe balance remains invested where it continues to earn 12% interest. D. None of the above Reference Periods 1 2 3 4 5 1% 0.990 0.980 0.971 0.961 0.951 2% 0.980 0.961 0.942 0.924 0.906 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 5% 0.952 0.907 0.864 0.823 0.784 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 Present Value of $1 7% 8% 9% 0.935 0.926 0.917 0.873 0.857 0.842 0.816 0.794 0.772 0.763 0.735 0.708 0.713 0.681 0.650 10% 0.909 0.826 0.751 0.683 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 15% 0.870 0.756 0.658 0.572 0.497 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 6 7 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.432 0.376 0.327 0.284 0.247 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 9 10 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.287 0.257 0.229 0.205 0.183 0.237 0.208 0.182 0.160 0.140 0.215 0.187 0.163 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 0.135 0.112 0.093 0.078 0.065 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 16 17 18 19 20 0.853 0.844 0.836 0.828 0.820 0.728 0.714 0.700 0.686 0.673 0.623 0.605 0.587 0.570 0.554 0.534 0.513 0.494 0.475 0.456 0.458 0.436 0.416 0.396 0.377 0.394 0.371 0.350 0.331 0.312 0.339 0.317 0.296 0.277 0.258 0.292 0.270 0.250 0.232 0.215 0.252 0.231 0.212 0.194 0.178 0.163 0.146 0.130 0.116 0.104 0.123 0.108 0.095 0.083 0.073 0.107 0.093 0.081 0.070 0.061 0.093 0.080 0.069 0.060 0.051 0.071 0.060 0.051 0.043 0.037 0.054 0.045 0.038 0.031 0.026 0.022 0.018 0.015 0.013 0.010 21 22 23 24 25 0.811 0.803 0.795 0.788 0.780 0.660 0.647 0.634 0.622 0.610 0.538 0.522 0.507 0.492 0.478 0.439 0.422 0.406 0.390 0.375 0.359 0.342 0.326 0.310 0.295 0.294 0.278 0.262 0.247 0.233 0.242 0.226 0.211 0.197 0.184 0.172 0.161 0.199 0.184 0.170 0.158 0.146 0.164 0.150 0.138 0.126 0.116 0.135 0.123 0.112 0.102 0.092 0.093 0.083 0.074 0.066 0.059 0.064 0.056 0.049 0.043 0.038 0.053 0.046 0.040 0.035 0.030 0.044 0.038 0.033 0.028 0.024 0.031 0.026 0.022 0.019 0.016 26 27 0.772 0.764 0.598 0.586 0.464 0.450 0.361 0.347 0.281 0.268 0.220 0.207 0.135 0.125 0.106 0.098 0.084 0.076 0.053 0.047 0.033 0.029 0.026 0.023 0.021 0.018 0.014 0.011 0.009 0.007 An Ann APP A Ann A. A Print Done Reference - Periods 1 2 3 1% 0.990 1.970 2.941 3.902 4.853 2% 0.980 1.942 2.884 3.808 4.713 12% 0.893 1.690 2.402 3.037 3.605 14% 0.877 1.647 2.322 2.914 3.433 15% 0.870 1.626 2.283 2.855 3.352 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 4 5 7 8 9 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 11 12 13 14 15 10.368 9.787 11.255 10.575 12.134 11.348 13.004 12.106 13.865 12.849 Present Value of Ordinary Annuity of $1 3% 4% 5% 6% 7% 8% 9% 10% 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 17.877 15.983 14.375 13.003 11.826 10.810 9.929 9.161 18.327 16.330 14.643 13.211 | 11.987 10.935 10.027 9.237 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.327 4.439 4.533 4.611 4.675 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 16 17 18 19 20 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 7.562 7.645 7.718 7.784 7.843 14.718 13.578 15.562 14.292 16.398 14.992 17.226 15.678 18.046 16.351 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.669 5.749 5.818 5.877 5.929 4.730 4.775 4.812 4.844 4.870 21 22 23 24 25 18.857 | 17.011 19.660 17.658 20.456 18.292 21.243 18.914 22.023 19.523 22.795 20.121 23.560 20.707 A 6.687 6.743 6.792 6.835 6.873 6.312 6.359 6.399 6.434 6.464 5.973 6.011 6.044 6.073 6.097 5.384 5.410 5.432 5.451 5.467 4.891 4.909 4.925 4.937 4.948 26 27 7.896 7.943 700 6.906 6.935 6.491 6.514 6.118 6.136 5.480 5.492 4.956 4.964 Print Done i Reference Future Value of $1 Periods 1% 2% 9% 2 3 4 1.010 1.020 1.030 1.041 1.051 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 7% 1.070 1.145 1.225 1.311 1.403 8% 1,080 1.166 1.260 1.360 1.469 1.090 1.188 1.295 1.412 1.539 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 14% 1.140 1.300 1.482 1.689 1.925 15% 1.150 1.323 1.521 1.749 2.011 2.313 2.660 3.059 3.518 4.046 6 7 8 9 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 1.501 1.606 1.718 1.838 1.967 1.587 1.714 1.851 1.999 2.159 1.677 1.828 1.993 2.172 2.367 1.772 1.949 2.144 2.358 2.594 2.195 2.502 2.853 3.252 3.707 11 12 13 14 15 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.601 1.665 1.732 1.801 1.710 1.796 1.886 1.980 2.079 1.898 2.012 2.133 2.261 2.397 2.105 2.252 2.410 2.579 2.759 2.332 2.518 2.720 2.937 3.172 2.853 3.138 3.452 3.798 4.177 3.479 3.896 4.363 4.887 5.474 4.226 4.818 5.492 6.261 7.138 4.652 5.350 6.153 7.076 8.137 2.580 2.813 3.066 3.342 3.642 3.970 4.328 4.717 5.142 5.604 16 17 18 19 20 1.173 1.184 1.196 1.208 1.220 1.373 1.400 1.428 1.457 1.486 1.605 1.653 1.702 1.754 1.806 1.873 1.948 2.026 2.107 2.191 2.183 2.292 2.407 2.527 2.653 2.540 2.693 2.854 3.026 3.207 2.952 3.159 3.380 3.617 3.870 4.595 5.054 5.560 6.116 6.727 6.130 6.866 7.690 8.613 9.646 8.137 9.276 10.58 12.06 13.74 9.358 10.76 12.38 14.23 16.37 21 22 23 24 25 1.232 1.245 1.257 1.270 1.282 1.516 1.546 1.577 1.608 1.641 1.860 1.916 1.974 2.033 2.094 2.279 2.370 2.465 2.563 2.666 2.786 2.925 3.072 3.225 3.386 3.400 3.604 3.820 4.049 4.292 4.549 4.822 4.141 4.430 4.741 5.072 5.427 3.426 3.700 3.996 4.316 4.661 5.034 5.437 5.871 6.341 6.848 7.396 7.988 6.109 6.659 7.258 7.911 8.623 7.400 8.140 8.954 9.850 10.83 10.80 12.10 13.55 15.18 17.00 15.67 17.86 20.36 23.21 26.46 18.82 21.64 24.89 28.63 32.92 26 27 1.295 1.308 1.673 1.707 174 2.157 2.221 2.772 2.883 3.556 3.733 5.807 6.214 9.399 10.25 11.92 13.11 19.04 21.32 30.17 34.39 37.86 43.54 An A Print Done Reference Periods 1 2 3 4 5 1% 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 3% 1.000 2.030 3.091 4.184 5.309 Future Value of Ordinary Annuity of $1 4% 5% 6% 7% 8% 9% 1.000 1.000 1.000 1.000 1.000 1.000 2.040 2.050 2.060 2.070 2.080 2.090 3.122 3.153 3.184 3.215 3.246 3.278 4.246 4.310 4.375 4.440 4.506 4.573 5.416 5.526 5.637 5.751 5.867 5.985 10% 1.000 2.100 3.310 4.641 6.105 12% 1.000 2.120 3.374 4.779 6.353 14% 1.000 2.140 3,440 4.921 6.610 15% 1.000 2.150 3.473 4.993 6.742 8 9 10 6.152 7.214 8.286 9.369 10.46 6.468 7.662 8.892 10.16 11.46 6.633 7.898 9.214 10.58 12.01 6.802 8.142 9.549 11.03 12.58 7.153 8.654 10.260 11.98 13.82 7.336 8.923 10.64 12.49 14.49 7.523 9.200 11.03 13.02 15.19 7.716 9.487 11.44 13.58 15.94 8.115 10.09 12.30 14.78 17.55 8.536 10.73 13.23 16.09 19.34 8.754 11.07 13.73 16.79 20.30 6.308 7.434 8.583 9.755 10.95 12.17 13.41 14.68 15.97 17.29 11 12 13 14 15 11.57 12.68 13.81 14.95 16.10 12.81 14.19 15.62 17.09 18,60 13.49 15.03 16.63 18.29 20.02 14.21 15.92 17.71 19.60 21.58 6.975 8.394 9.897 11.49 13.18 14.97 16.87 18.88 21.02 23.28 25.67 28.21 30.91 33.76 36.79 15.78 17.89 20.14 22.55 25.13 16.65 18.98 21.50 24.21 27.15 17.56 20.14 22.95 26.02 29.36 18.53 21.38 24.52 27.98 31.77 20.65 24.13 28.03 32.39 37.28 23.04 27.27 32.09 37.58 43.84 24.35 29.00 34 35 40.50 47.58 16 17 18 19 17.26 18.43 19.61 20.81 22.02 18.64 20.01 21.41 22.84 24.30 20.16 21.76 23.41 25.12 26.87 21.82 23.70 25.65 27.67 29.78 23.66 25.84 28.13 30.54 33.07 27.89 30.84 34.00 37.38 41.00 30.32 33.75 37.45 41.45 45.76 33.00 36.97 41.30 46.02 51.16 35.95 40.54 45.60 51.16 57.28 42.75 48.88 55.75 63.44 72.05 50.98 59.12 68.39 78.97 91.02 55.72 65.08 75.84 88.21 102.4 21 22 23 24 25 23.24 24.47 25.72 26.97 28.24 25.78 27.30 28.85 30.42 32.03 28.68 30.54 32.45 34.43 36.46 31.97 34.25 36.62 39.08 41.65 35.72 38.51 41.43 44.50 47.73 39.99 43.39 47.00 50.82 54.86 59.16 63.71 44,87 49.01 53.44 58.18 63.25 50.42 55.46 60.89 66.76 73.11 56.76 62.87 69.53 76.79 84.70 64.00 71.40 79.54 88.50 98.35 81.70 92.50 104.6 118.2 133.3 104.8 120.4 138.3 158.7 181.9 118.8 137.6 159.3 184.2 212.8 44.31 26 27 29.53 30.82 33.67 35.34 38.55 40.71 51.11 54.67 68.68 74.48 070 79.95 87.35 93.32 102.7 109.2 121.1 150.3 169.4 208.3 238.5 245.7 283.6 47.08 AP 20 Print Done