Question

In: Finance

How much money does Suzie need to have in her retirement savings account today if she...

How much money does Suzie need to have in her retirement savings account today if she wishes to withdraw $42,000 a year for 25 years? She expects to earn an average rate of return of 9.55 percent.

Group of answer choices

$394,819.18

$407,419.81

$385,160.98

$390,202.69

$388,683.83

Solutions

Expert Solution

Money needed today = Amount/(1+ rate )^1 + Amount/(1+ rate )^2 +Amount/(1+ rate )^3 +Amount/(1+ rate )^4 +Amount/(1+ rate )^5 +............... Amount/(1+ rate )^24 +Amount/(1+ rate )^25

Money needed today = 42000/(1+0.0955)^1 + 42000/(1+0.0955)^2 +42000/(1+0.0955)^3 +42000/(1+0.0955)^4 +42000/(1+0.0955)^5 +42000/(1+0.0955)^6 +42000/(1+0.0955)^7 +42000/(1+0.0955)^8 + ......... 42000/(1+0.0955)^24 +42000/(1+0.0955)^25

= 394819.18 Answer

The first option is correct.


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