Question
In: Finance
You wish to retire in 20 years. Currently, your pre-retirement fund has RM50,000 in a savings...
You wish to retire in 20 years. Currently, your pre-retirement fund has RM50,000 in a savings account yielding 3.0% annually and RM300,000 quality stocks yielding 11.0% annually. Furthermore, you expect to add RM8,000 to the savings account and RM15,000 to your stock portfolios at the end of each year in the next 20 year. You will keep this fund until the retirement date.
Calculate the overall rate of return per year that you must earn on your post-retirement fund if you wish to withdraw RM240,000 at the end of each year in the following 25 years after retirement.
How much would your remaining fund be after three year-end
withdrawals of RM 300,000 each post the retirement? Assume your
fund earns a return of 5% per year.
Solutions
Expert Solution
| Year | Savings Account | Addition In Savings Account | Total Saving Accounts | Savings with Interest @ 3% | Quality Stock | Addition In Savings Account | Total Portfolio | Portfolio with Interest @ 11% |
| 0 | 50,000 | - | 50,000 | 3,00,000 | - | 3,00,000 | ||
| 1 | 50,000 | 8,000 | 58,000 | 59,740 | 3,00,000 | 15,000 | 3,15,000 | 349650 |
| 2 | 59,740 | 8,000 | 67,740 | 69,772 | 3,15,000 | 15,000 | 3,30,000 | 366300 |
| 3 | 67,740 | 8,000 | 75,740 | 78,012 | 3,30,000 | 15,000 | 3,45,000 | 382950 |
| 4 | 75,740 | 8,000 | 83,740 | 86,252 | 3,45,000 | 15,000 | 3,60,000 | 399600 |
| 5 | 83,740 | 8,000 | 91,740 | 94,492 | 3,60,000 | 15,000 | 3,75,000 | 416250 |
| 6 | 91,740 | 8,000 | 99,740 | 1,02,732 | 3,75,000 | 15,000 | 3,90,000 | 432900 |
| 7 | 99,740 | 8,000 | 1,07,740 | 1,10,972 | 3,90,000 | 15,000 | 4,05,000 | 449550 |
| 8 | 1,07,740 | 8,000 | 1,15,740 | 1,19,212 | 4,05,000 | 15,000 | 4,20,000 | 466200 |
| 9 | 1,15,740 | 8,000 | 1,23,740 | 1,27,452 | 4,20,000 | 15,000 | 4,35,000 | 482850 |
| 10 | 1,23,740 | 8,000 | 1,31,740 | 1,35,692 | 4,35,000 | 15,000 | 4,50,000 | 499500 |
| 11 | 1,31,740 | 8,000 | 1,39,740 | 1,43,932 | 4,50,000 | 15,000 | 4,65,000 | 516150 |
| 12 | 1,39,740 | 8,000 | 1,47,740 | 1,52,172 | 4,65,000 | 15,000 | 4,80,000 | 532800 |
| 13 | 1,47,740 | 8,000 | 1,55,740 | 1,60,412 | 4,80,000 | 15,000 | 4,95,000 | 549450 |
| 14 | 1,55,740 | 8,000 | 1,63,740 | 1,68,652 | 4,95,000 | 15,000 | 5,10,000 | 566100 |
| 15 | 1,63,740 | 8,000 | 1,71,740 | 1,76,892 | 5,10,000 | 15,000 | 5,25,000 | 582750 |
| 16 | 1,71,740 | 8,000 | 1,79,740 | 1,85,132 | 5,25,000 | 15,000 | 5,40,000 | 599400 |
| 17 | 1,79,740 | 8,000 | 1,87,740 | 1,93,372 | 5,40,000 | 15,000 | 5,55,000 | 616050 |
| 18 | 1,87,740 | 8,000 | 1,95,740 | 2,01,612 | 5,55,000 |
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