Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have just turned 20 and would like to retire when you are 60 years old. You plan to start saving for your retirement from

You have just turned 20 and would like to retire when you are 60 years old. You plan to start saving for your retirement from the end of this year (i.e. your first deposit into your retirement fund will be on your 21st birthday). You expect to live until you are 100. Based on your calculations, you believe you will need $900,000 per year to live comfortably in your retirement.

You expect your investments to generate a return of 10% per year, compounded semiannually. Assume all payments are at the end of the year. Round your interest rate to a % with two decimal places e.g. 10.25% (or 0.1025)

a) How much do you need to save every year until your retirement? Assume all payments are at the end of the year. Round your interest rate to a % with two decimal places e.g. 10.25% (or 0.1025)

b) At age 45 you inherit $75,000 which you pay into your retirement savings account. Assuming you pay the same amount into your retirement fund as in part (a): i. How much will you now have in your retirement account at age 60? ii. Assuming you still expect to live to age 100, how much will you now have as retirement income from age 60 to 100?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Money Banking And Financial Markets

Authors: Laurence Ball

1st Edition

0716759349, 9780716759348

More Books

Students also viewed these Finance questions

Question

Do you favor a civil service system? Why or why not?

Answered: 1 week ago