Question

In: Finance

Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of...

Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of $2,500,000 on the day you retire. Suppose also that you’ve saved $100,000 toward your retirement so far, and that your investment account earns a nominal rate of 7.5% per year, compounded monthly. In addition, suppose you expect a windfall inheritance of $200,000 five years from now that you will invest in this account.

a) What is the effective interest rate, or annual percentage yield, of your investment account?

b) How much money should you deposit into that account every year in order to reach your goal?

Solutions

Expert Solution



Related Solutions

Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of...
Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of $2,500,000 on the day you retire. Suppose also that you’ve saved $100,000 toward your retirement so far, and that your investment account earns a nominal rate of 7.5% per year, compounded monthly. In addition, suppose you expect a windfall inheritance of $200,000 five years from now that you will invest in this account. a) What is the effective interest rate, or annual percentage yield,...
Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of...
Suppose you have 25 years until you retire, and that you desire a retirement nest-egg of $2,500,000 on the day you retire. Suppose also that you’ve saved $100,000 toward your retirement so far, and that your investment account earns a nominal rate of 7.5% per year, compounded monthly. In addition, suppose you expect a windfall inheritance of $200,000 five years from now that you will invest in this account. a) What is the effective interest rate, or annual percentage yield,...
if you have desire to have a 500,000 nest egg one day, how much will you...
if you have desire to have a 500,000 nest egg one day, how much will you need to contribute to an retirement account on a monthly basis assuming you have 30 years to save and expect an average rate or return of 5.5%?
You have 34 years left until retirement and want to retire with $4.6 million. Your salary...
You have 34 years left until retirement and want to retire with $4.6 million. Your salary is paid annually, and you will receive $72,000 at the end of the current year. Your salary will increase at 4.5 percent per year, and you can earn a 12.5 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?
25 years old, salary is 70,000 1. assume your nest egg is 4,504,260.
25 years old, salary is 70,000 1. assume your nest egg is 4,504,260. since you are 25 you want to be more aggressive with investments and expect to earn 8% while saving for retirement. you were left 50,000 cash inheritance that you will invest at (8%) to help fund your nest egg. If you start saving at 25 yrs and plan to save until you retire at age 65, how much must you save each year (at the end of...
Joey plans on retiring in 40 years and would like to have a nest egg of...
Joey plans on retiring in 40 years and would like to have a nest egg of $5,000,000 saved by then. How much do you need to save each month if you can earn a 15% annual return? How much do you need to save each month if you can only earn a 5% annual return? Still working with the 5% annual return, how much do you need to save each month if you wait ten years to start (30 years...
You want to start saving for retirement. Your goal is to retire in 25 years. Assume...
You want to start saving for retirement. Your goal is to retire in 25 years. Assume that you have $25,000 to invest now and that you will contribute $4,800 per year. What will your account be worth when you retire if you can earn 6% a year? What will your account be worth if the 6% annual return is compounded monthly and instead of contributing $4,800 per year, you contribute $400 monthly (you still start with $25,000) Assume all payments...
You are planning to save for retirement. You would like to retire 25 years from today...
You are planning to save for retirement. You would like to retire 25 years from today and you currently have $100,000 set aside. You anticipate saving $420 every other week (26 periods per year – $280 out of your pocket and $140 from a company match) into your 401(k) plan. You anticipating earning an 8.7% rate of return over the next 12 years. After 12 years, you will change your biweekly savings to $X every other week (combined contribution from...
Suppose you are just starting your retirement savings at age 25, and plan to retire at...
Suppose you are just starting your retirement savings at age 25, and plan to retire at age 70. Your goal is to save a million dollars in your IRA and you believe you can earn a 7% rate of return on your investment. How much must you contribute to your IRA each year to meet your goal? Select one: a. $22,222 b. $3,500 c. $619 d. $21,881
You will retire in 30 years. At the beginning of each month until you retire, you...
You will retire in 30 years. At the beginning of each month until you retire, you will invest X earning interest at 9% convertible monthly. Starting at year 30, you will withdraw $4,000 at the beginning of each month for the next 15 years. Also, starting at year 30, your fund will only earn interest at 6% convertible monthly. Find X such that your account will be empty after the last withdrawal.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT