SITUATIONS

1. Charles Jordy is planning to save for his retirement. He has decided that he can save $3,000 at the end of each year for the next 10 years, $5,000 at the end of each year for Years 11 through 20, and $10,000 at the end of each year for Years 21 through 30.
2. Patricia Karpas has $200,000 in savings on the day she retires. She intends to spend $2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend $6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period.

QUESTION 2A (In Situation 1)

How much will Charles have at the end of 30 years if his savings can earn 10%?

How much will Charles have at the end of 30 years if his savings can earn 6%?

QUESTION 2B (In Situation 1)

If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%?

If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 6%?

QUESTION 2C (In Situation 1)

How much would Charles need to invest today to have the same amount available at the time he retires as calculated in 2(a) at 10%?

How much would Charles need to invest today to have the same amount available at the time he retires as calculated in 2(a) at 6%?

QUESTION 3 (In Situation 2)

How much will Patricia's annuity be?