Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your uncle is celebrating his 33 th birthday today and wants to start saving for his retirement at the age of 63. He wants to

Your uncle is celebrating his 33th birthday today and wants to start saving for his retirement at the age of 63. He wants to be able to withdraw $100,000 from his saving account on each birthday for 20 years following his retirement. The first withdraw will be on his 64th birthday. Your uncle intends to invest his money in a local bank that offers 7% interest rate per year. He wants to make equal payments on each birthday into the account established in the local bank for his retirement fund.

  1. If your uncle starts making these deposits on his 33th birthday and continues to make deposits until he is 63, what amount must he deposit annually to be able to make the desired withdrawals at retirement?
  2. If your uncle has just inherited a large sum of money, so instead of making equal payments, he has decided to pay one lump sum payment on his 33th birthday to cover his retirement needs. What amount does he have to deposit?
  3. If your uncle's employer informs your uncle that he will contribute $1,000 to your uncle account every year. Also, if your uncle expects $100,000 from another investment on his 53th birthday, which he will also put into the retirement account. What amount must he deposit annually now to be able to make the desired withdrawals at retirement.

Note: The use of a timeline will help you to solve this problem.

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

Step: 3

blur-text-image

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

Principles of Managerial Finance

Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix

Arab World Edition

1408271583, 978-1408271582

More Books

Students also viewed these Finance questions