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 $235,000 per year for the next 30 years (based on family history, you think you will live to age 70). 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 70 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 $235,000 withdrawals.) (Round your final answer to the nearest whole dollar.) To make the plan work, you must accumulate this amount 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 far more accumulated than what you will withdraw because you will withdraw a large portion of the investment every yearthe balance remains invested where it continues to earn 12% interest. B. 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. C. 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. OD. None of the above Reference 6% 0.943 0.890 0.840 0.792 0.747 7% 0.935 0.873 0.816 0.763 0.713 8% 0.926 0.857 0.794 0.735 0.681 9% 10% 12% 14% 15% 16% 18% 0.917 | 0.909 0.893 0.877 0.870 0.862 0.847 0.8420.826 0.797 0.769 0.756 0.743 0.718 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.650 0.621 0.567 0.519 0.497 0.476 0.437 20% 0.833 0.694 0.579 0.482 0.402 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.547 0.513 0.452 0.400 0.376 0.354 0.314 0.279 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.422 0.386 0.322 0.270 0.247 0.22 0.191 0.162 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 Periods 1% 2% 3% 4% 5% Period 1 0.990 0.980 0.971 0.962 0.952 Period 2 0.980 0.961 0.943 0.925 0.907 Period 3 0.971 0.942 0.915 0.889 0.864 Period 4 0.961 0.924 0.888 0.855 0.823 Period 5 0.951 0.906 0.863 0.822 0.784 Period 6 0.942 0.888 0.837 0.790 0.746 Period 7 0.933 0.871 0.813 0.760 0.711 Period 8 0.923 0.853 0.789 0.731 0.677 Period 9 0.914 0.837 0.766 0.703 | 0.645 Period 10 0.905 0.820 0.744 0.676 0.614 Period 11 0.896 0.8040.722 0.650 0.585 Period 12 0.887 0.788 0.701 0.625 0.557 Period 13 0.879 0.773 0.681 0.601 0.530 Period 14 0.870 0.758 0.661 0.577 0.505 Period 15 0.861 0.743 0.642 0.555 0.481 Period 16 0.853 0.728 0.623 0.534 0.458 Period 17 0.844 0.714 0.605 0.513 0.436 Period 18 0.836 0.700 0.587 0.494 0.416 Period 19 0.828 0.686 0.570 0.475 0.396 Period 20 0.820 0.673 0.554 0.456 0.377 Period 21 0.811 0.660 0.538 0.439 0.359 Period 22 0.803 0.647 0.522 0.422 0.342 Period 23 0.795 0.6340.507 0.406 0.326 Period 24 0.788 0.622 0.492 0.390 0.310 Period 25 0.780 0.610 0.478 0.375 0.295 Period 26 0.772 0.598 0.464 0.361 0.281 Period 27 0.764 0.586 0.450 0.347 0.268 Period 28 0.757 0.574 0.437 0.333 0.255 Period 29 0.7490.563 0.424 0.321 0.243 Period 30 0.742 0.552 0.412 0.308 0.231 Period 40 0.672 0.453 0.307 0.208 0.142 Period 50 0.608 0.372 0.228 0.141 0.087 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.326 0.290 0.229 0.182 0.163 0.145 0.116 0.093 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.252 0.218 0.163 0.123 0.107 0.093 0.071 0.054 0.231 0.198 0.146 0.108 0.093 0.080 0.060 0.045 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 0.194 0.164 0.116 0.083 0.070 0.060 0.043 0.031 0.178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 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 0.294 0.278 0.262 0.247 0.233 0.242 0.226 0.211 0.197 0.184 0.199 0.184 0.170 0.158 0.146 0.220 0.207 0.196 0.185 0.174 0.172 0.161 0.150 0.141 0.131 0.135 0.125 0.116 0.107 0.099 0.1640.135 0.093 0.064 0.053 0.044 0.031 0.022 0.150 0.123 0.083 0.056 0.046 0.038 0.026 0.018 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 0.126 0.102 0.066 0.043 0.035 0.028 0.019 0.013 0.116 0.092 0.059 0.038 0.030 0.024 0.0160.010 0.106 0.084 0.053 0.033 0.026 0.021 0.014 0.009 0.098 0.076 0.047 0.029 0.023 0.018 0.011 0.007 0.090 0.069 | 0.042 0.026 0.020 0.016 0.010 | 0.006 0.082 0.063 0.037 0.022 0.017 0.014 0.008 0.005 0.075 0.057 0.033 0.0200.015 0.012 0.007 0.004 0.032 0.022 0.011 0.005 0.0040.003 0.001 0.001 0.097 0.067 0.046 0.054 0.034 0.021 0.013 0.009 0.003 0.001 0.001 0.001 - Reference You the n into a years Read 16% 18% 20% 0.862 0.847 0.833 1.605 1.566 1.528 2.246 2.174 2.106 2.798 2.690 2.589 3.274 3.127 2.991 Reqy (Rou To ml 3.685 3.498 3.326 4.039 3.812 3.605 4.344 4.078 3.837 4.607 4.3034031 4.833 4.494 4.192 Reqy differ Ovell How Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 Period 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 Period 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.4022.322 2.283 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.855 Period 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 Period 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.111 3.889 3.784 Period 7 6.728 6.472 6.230 6.0025.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.160 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4.639 4.487 Period 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.328 4.946 4.772 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.6505.216 5.019 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 | 6.814 6.1945.660 5.421 Period 13 12. 134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.842 5.583 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.6286.002 5.724 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8,061 7.606 6.811 6.142 5.847 Period 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.9746.265 5.954 Period 17 15.562 14.292 13.166 12.166 11.27410.4771 9.763 9.122 8.544 8.022 7.1206.373 6.047 Period 18 16.398 14.992 | 13.754 | 12.659 11.690 10.828 10.059 9.3728.756 8.201 7.250 6.467 6.128 Period 19 17.226 15.678 | 14.324 | 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 6.198 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.469 6.623 6.259 Period 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 7.5626.687 6.312 Period 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.2019.442 8.772 7.645 6.743 6.359 Period 23 20.456 18.292 | 16.444 14.857 13.489 12.303 11.272 10.371 9.5808.883 7.718 6.792 6.399 Period 24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 7.784 6.835 6.434 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.8239.077 7.843 6.873 6.464 Period 26 22.795 20.121 | 17.877 15.983 14.375 13.003) 11.826 10.8109.929 9.161 7.896 6.906 6.491 Period 27 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027 9.237 7.943 6.935 6.514 Period 28 24.316 21.28118.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 7.984 6.961 | 6.534 Period 29 25.066 21.844 19.188 16.984 15.141 13.591 12.278 11.158 10.1989.370 8.022 6.983 6.551 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.055 | 7.003 6.566 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.244 7.105 6.642 5.029 4.656 4.327 5.197 4.793 4.439 5.342 4.910 4.533 5.468 5.0084.611 5.575 5.092 4.675 5.669 5.1624.730 5.749 5.222 4.775 5.818 5.2734.812 5.877 5.3164.844 5.929 5.353 4.870 Thes OAL OB c 2 5.973 5.384 4.891 6.011 5.410 4.909 6.044 5.432 4.925 6.073 5.451 4.937 6.097 5.467 4.948 6.118 5.480 4.956 6.136 5.492 4.964 6.152 5.5024.970 6.166 5.510 4.975 6.177 5.517 4.979 6.233 5.548 4.997 w investment fund that you expect will earn 12% ner vear You will leave the money in this fund until it is completely denleted when yo Reference 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 4% 5% 6% 7% 8% 9% 10% 1.030 1.040 | 1.050 1.060 1.070 1.080 1.090 1.100 1.061 1.0821.103 1.124 1.145 1.166 1.1881.210 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.126 1.170 1.216 1.262 1.311 1.360 1.4121.464 1.159 | 1.217 1.276 1.338 1.403 1.469 1.539 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 15% 1.140 1.150 1.300 1.323 1.482 1.521 1.689 1.749 1.925 2.011 Jhdr hbe 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 2.195 2.313 2.502 2.660 2.853 3.059 3.252 3.518 3.707 4.046 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 Period 40 Period 50 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.974 1.230 1.316 1.407 1.504 1.606 1.7141.828 1.949 2 211 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2.144 2.476 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.773 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 1.384 1.539 1.710 1.898 2.105 | 2.332 2.580 2.853 3.479 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.896 1.469 1.665 1.886 2.133 2410 2.720 3.066 3.452 4.363 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 1.558 1.801 | 2.079 2.397 2.759 3.172 3.642 4.177 5.474 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.595 6.130 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.054 6.866 1.702 2.0262.407 2.854 3.380 3.996 4.717 5.560 7.690 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 1.806 2.191 2.653 3.207 3.870 4.661 5.604 6.727 9.646 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 10.80 1.916 2.370 2.925 3.604 4.430 5.4376.659 8.140 12.10 1.974 2.465 3.072 3.820 4.741 5.871 | 7.258 8.954 13.55 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 15.18 2.094 2.666 3.3864.292 5.427 6.848 8.623 10.83 17.00 4.226 4.652 4.818 5.350 5.492 6.153 6.2617.076 7.1388.137 8.137 9.358 9.276 10.76 10.58 12.38 12.06 14.23 13.74 16.37 ar- 1.173 1.184 1.196 1.208 1.220 1.373 1.400 1.428 1.457 1.486 het Jyou 1.232 1.245 1.257 1.270 1.282 1.516 1.546 1.577 1.608 1.641 15.67 18.82 17.86 21.64 20.36 24.89 23.21 28.63 26.46 | 32.92 1.295 1.308 1.321 1.335 1.348 1.673 1.707 1.741 1.776 1.811 2.157 2.772 3.556 4.549 5.8077.396 9.399 11.92 2.221 2.883 3.733 4.822 6.214 7.988 10.25 13.11 2.288 2.999 3.920 5.1126 649 8.627 11.17 14.42 2.357 3.119 4.116 5.418 7.1149.317 12.17 15.86 2.427 3.243 4.3225.743 7.612 10.06 13.27 17.45 19.04 21.32 23.88 26.75 29.96 30.17 37.86 34.3943.54 39.20 50.07 44.69 57.58 50.95 66.21 1.489 2.208 3.262 4.801 7.040 10.29 14.97 21.72 31.41 45.26 93.05 188.9 | 267.9 1.645 2.692 4.384 7.107 11.47 18.42 29.46 46.90 74.36 117.4 289.0 700.2 1,084 Reference Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2010 2020 2030 2040 2050 2.060 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.030 3.060 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 4.184 4246 4310 4.375 4.440 4.506 4.573 4.641 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6.353 6.610 6.742 6.152 6.308 6.468 6.633 6.802 6.975 7.1537.3367.523 7.716 8.115 8.536 8.754 7.214 7.4347.6627.898 8.142 8.394 8.654 8.9239.2009.487 10.09 | 10.73 11.07 8.286 8.583 8.8929.214 9.549 9.897 10.260 10.64 11.03 12.30 13.23 13.73 9.369 9.755 10.16 10.58 | 11.03 11.49 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 10.95 11.46 12.01 | 12.58 13.18 13.82 14.49 15.1915.94 17.55 19.34 20.30 11.57 12.17 | 12.81 13.49 14.21 14.97 15.78 16.65 17.56 18.53 20.65 23.04 24.35 12.68 13.41 14.19 15.03 15.92 16.87 17.89 18.98 20.14 21.38 24.13 27.27 29.00 13.81 14.68 | 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34 35 14.95 15.97 17.09 | 18.29 | 19.60 21.02 22.55 24.21 26.02 27.98 32.39 37.58 40.50 16.10 17.29 18.60 20.02 21.58 | 23.28 25.13 27.15 29.36 | 31.77 37.28 43.84 47.58 11.44 17.26 18.64 20.16 21.82 23.66 25.67 18,43 20.01 21.76 23.70 25.84 28.21 19.61 21.41 23.41 25.65 28.13 30.91 20.81 22.84 25.12 27.67 30.54 33.76 22.02 24 30 26.87 29.78 33.07 36.79 27.89 30.3233.00 35.95 42.75 50.98 55.72 30.84 33.75 36.97 40.54 48.88 59.12 65.08 34.00 37.45 41.30 45.60 55.75 68.39 75.84 37.38 41.45 46.02 51.16 63.44 78.97 88.21 41.00 45.76 51.16 57.28 72.05 91.02 1024 23 24 25.78 28.68 31.97 35.72 24.47 27.30 30.54 34.25 38.51 25.72 28.85 32.45 36.62 41.43 26.97 30.42 34.43 39.08 44.50 28.24 32.03 36.46 41.65 47.73 39.99 43.39 47.00 50.82 54.86 44.87 50.42 56.76 64.00 81.70 104.8 118.8 49.01 55.46 62.87 71.40 92.50 120.4 137.6 53.44 60.89 69.53 79.54 104.6138.3 159.3 58.18 66.76 76.79 | 88.50 118.2 158.7 184.2 63.25 73.11 84.70 98.35 133.3 181.9 212.8 29.53 33.67 38.55 44.31 51.11 59.16 30.82 35.34 40.71 47.08 54.67 63.71 32.13 37.05 42.93 49.97 | 58.40 68.53 33.45 38.79 45.22 52.97 62.32 73.64 34.78 40.57 47.58 56.08 66.44 79.06 48.89 60.40 75.40 95.03 | 120.8 154.8 68.68 | 79.95 93.32 109.2 150.3 208.3 | 245.7 74.48 87.35 102.7 121.1 169.4 238.5 283.6 80.70 95.34 113.0 134.2 190.7 2729 | 327.1 87.35 104.0 124.1 148.6 214.6 312.1 377.2 94.46 113.3 136.3 164.5 241.3 356.8 434.7 Period 40 199.6 259.1 337.9442.6767.1 1,342 | 1,779 406.5 573.8 815.11,164 2.400 4,995 7,218 Period 50 64.46 84.58 112.8 152.7 | 209.3 290.3 the next 30 years (based on family history, you think you will live to age 70). You plan to save by making 15 equal annual installments (from age 25 to age 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 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 $235,000 withdrawals (Round your final answer to the nearest whole dollar.) hese numbers be To make the plan work, you must accumulate this amount by retirement Requirement 2. How different? Requirements Over the course of However, by age 40 1. How much money must you accumulate by retirement to make your plan work? (Hint Find the present value of the $235,000 withdrawals.) These numbers are 2. How does this amount compare to the total amount you will withdraw from the investment O A. You need to during retirement? How can these numbers be so different? balance rema O B. You need to remains inves OC. You need to Print Done retirement OD. None of the very yearthe yearthe balanc nt when you reac