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 draw

$ 210 comma 000$210,000

per year for the next

4040

years (based on family history, you think you'll live to age

8080).

You plan to save for retirement by making

2020

equal annual installments (from age

2020

to age 40) into a fairly risky investment fund that you expect will earn

1010%

per year. You will leave the money in this fund until it is completely depleted when you are

8080

years old.

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(Click the icon to view the present value annuity table.)

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(Click the icon to view the future value annuity table.)

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(Click the icon to view the present value table.)

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(Click the icon to view the future value table.)

To make your plan work answer the following questions:

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1. How much money must you accumulate by retirement?

(Hint:

Find the present value of the

$ 210 comma 000$210,000

withdrawals.)

Calculate the present value to find out how much money must be accumulated by retirement. (Round your answer to the nearest whole dollar.)

The present value is $

2,053,590

.

2. How does this amount compare to the total amount you will draw out of the investment during retirement? How can these numbers be so different?

Over the course of your retirement you will be withdrawing $		8,400,000	. However, by age 40 you only need to have invested
the present value.

These numbers are different because:

A.

You need to have far less accumulated than what you will withdraw because you only withdraw a portion of the investment every

yearlong dashthe

balance remains invested where it continues to earn

1010%

interest.

B.

You need to have the same accumulated as you will withdraw because you will not earn further interest on your investment when you reach retirement.

C.

You need to have far more accumulated than what you will withdraw because you will withdraw a large portion of the investment every

yearlong dashthe

balance remains invested where it continues to earn

1010%

interest.

D.

None of the above.

Please not sure of it is A , B Oor D . THANKS