Your independent retirement account (IRA) will provide you with $25,000 per year once you retire. You plan to start withdrawals from your IRA at 58 years of age (YOA). Your IRA will provide you with $25,000 per year continuously until you die. You are now 54 years old. You plan to withdraw from your IRA account at a constant conservative rate of 5% per year. This rate will preserve the principal in your account for your heirs. You instructed your financial advisor to invest your IRA funds in investments with moderate risk that target a 7% rate of return (ROR). a) Draw a cash flow diagram for monthly cash provided by your IRA when you turn 58 YOA. Include all unknown cash flows (for example, F =?), all known cash flows, interest rate(s), and actual and/or series years NPER. (10 points) b) The capitalized cost amount you must place in your IRA by the time you are 58 YOA is closest to which of the following costs? Clearly circle only one answer. (10 points) a. $601,051.84 b. $148,360.12 c. $993,200.84 d. $408,148.94

Your independent retirement account (IRA) will provide you with $25,000 per year once you retire. You plan to start withdrawals from your IRA at 58 years of age (YOA). Your IRA will provide you with $25,000 per year continuously until you die. You are now 54 years old. You plan to withdraw from your IRA account at a constant conservative rate of 5% per year. This rate will preserve the principal in your account for your heirs. You instructed your financial advisor to invest your IRA funds in investments with moderate risk that target a 7% rate of return (ROR). a) Draw a cash flow diagram for monthly cash provided by your IRA when you turn 58 YOA. Include all unknown cash flows (for example, F= ?), all known cash flows, interest rate(s), and actual and/or series years NPER. (10 points) b) The capitalized cost amount you must place in your IRA by the time you are 58 YOA is closest to which of the following costs? Clearly circle only one answer. (10 points) a. $601,051.84 b. $148,360.12 c. $993,200.84 d. $408,148.94