Business, 29.07.2020 06:01, oliviakgobbell

You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. ou think you can earn 11.0% per year on your investments and you plan to retire in 41 years, immediately after making your last $5,000 investment. a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?
c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 11.0% in retirement)?
d. If, instead, you decide to withdraw $647,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?
e. Assuming the most you can afford to save is $ 1 comma 000$1,000 per year, but you want to retire with
$1,000,000 in your investment account, how high of a return do you need to earn on your investments?

Answers: 1

Show answers

Answers

answered: sofyan00404

a. How much will you have in your retirement account on the day you retire?

future value of the annuity = annual payment x (FV annuity factor, 11%, 40 periods) = $5,000 x 581.826 = $2,909,130

b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?

present value = future value / (1 + interest rate)ⁿ = $2,909,130 / 1.11⁴¹ = $40,320.04

c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 11.0% in retirement)?

payment = present value / annuity factor (PV annuity factor, 11%, 28 years) = $2,909,130 / 8.60162 = $338,207.22

d. If, instead, you decide to withdraw $647,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?

We can first try to get an approximate answer. The annuity factor = $2,909,130 / $647,000 = 4.49633694. Now looking at an annuity table we can look at the closest amount for 11%. The answer is between 6 years (annuity factor 4.2305) and 7 years (annuity factor 4.7122). This means that in less than 7 years you will have no more money left.

e. Assuming the most you can afford to save is $ 1 comma 000$1,000 per year, but you want to retire with $1,000,000 in your investment account, how high of a return do you need to earn on your investments?

Again we must use the future value to determine the annuity factor. Annuity factor = $1,000,000 / $1,000 = 1,000. Using an annuity calculator to determine the closest rate (for 40 periods) = 12.9515% ≈ 12.95%

answered: Guest

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

i really hope this answer you out! it makes my day people like you and giving back to the community that has me through school! if you could do me a favor, if this you and this is the very best answer and you understand that all of my answers are legit and top notch. mark as brainliest! and have a awesome day!

answered: Guest

; djf; as

Other questions on the subject: Business

Business, 21.06.2019 22:30, ringo12384

Quantitative problem: you need $20,000 to purchase a used car. your wealthy uncle is willing to lend you the money as an amortized loan. he would like you to make annual payments for 4 years, with the first payment to be made one year from today. he requires a 8% annual return. what will be your annual loan payments? round your answer to the nearest cent. do not round intermediate calculations. $ how much of your first payment will be applied to interest and to principal repayment? round your answer to the nearest cent. do not round intermediate calculations. interest: $ principal repayment

Answers: 1

continue

Business, 22.06.2019 14:30, ayoismeisjjjjuan

Amethod of allocating merchandise cost that assumes the first merchandise bought was the first merchandise sold is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. average cost method.

Answers: 3

continue

Business, 22.06.2019 14:40, ZoomZoom44

You are purchasing a bond that currently sold for $985.63. it has the time-to-maturity of 10 years and a coupon rate of 6%, paid semi-annually. the bond can be called for $1,020 in 3 years. what is the yield to maturity of this bond?

Answers: 2

continue

Business, 22.06.2019 17:30, samanthaepperson

The purchasing agent for a company that assembles and sells air-conditioning equipment in a latin american country noted that the cost of compressors has increased significantly each time they have been reordered. the company uses an eoq model to determine order size. what are the implications of this price escalation with respect to order size? what factors other than price must be taken into consideration?

Answers: 1

continue

Do you know the correct answer?

You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year wi...