8. Suppose that you are now 30 and that you would like $2 million at age...

8. Suppose that you are now 30 and that you would like $2 million at age 65 to fund your retirement. You would like to save each year an amount that grows by 5% each year (that is, if you save $1 this year, you will save $1.05 next year). Assume that the discount rate is 8%. How much should you start saving at the end of this year? (Hint: first calculate the present value of the $2 million, then use the growing annuity formula to calculate the amount you must save at the end of this year).

		$8,920
		$6,473
		$15,200
		$57,142

9. You’ve decided to buy a new computer that costs $1,500. But Best Buy will let you take the computer home without making paying the full price immediately. Rather, Best Buy will let you pay $500 now, and $500 at the end of each of the next two years.

Your bank offers you a savings account that earns 2% annually, and a two-year certificate of deposit (CD) that earns 5% annually. Note that to earn the 5% on the CD, you have to leave your money there for the full two years.

How much money do you need today to make sure you can make all the payments to Best Buy?

		1500
		1470.78
		1443.71
		1429.71

Expert Solution

jeff jeffy answered 5 months ago

a) You would like to retire 30 years from now with $2 million dollars. If you...

a) You would like to retire 30 years from now with $2 million dollars. If you get a big inheritance now, how much money do you need to deposit now so that it grows to $2 million assuming an annual interest rate of 6% with interest compounded monthly? b) Suppose in question a) that instead of a one-time payment, you want to save monthly for your retirement. How much should your monthly savings be with interest compounded monthly?

You now realize you would like to retire in 30 years (age 60). You are currently...

You now realize you would like to retire in 30 years (age 60). You are currently making $90K a year. After your life expenditure and taxes, you are able to save 10% of your salary. You come from a family with really good genes so you expect to live another 25 years after retirement (to an age of 85 years old). You do not want to be a burden on your family and it’s not likely there will be any...

You are 22 now and would like to retire at age of 67. After you retire,...

You are 22 now and would like to retire at age of 67. After you retire, you assume you will live for another 20 years until 87 years old. Suppose you want to withdraw $5,000 at the beginning of each month from your retirement plan after you retire, and the monthly return of your retirement plan is 0.5%. a. In order to support your monthly withdrawal after retirement, how much do you need to accumulate when you are 67? b....

You would like to have $5 million dollars when you retire at age 65. You are...

You would like to have $5 million dollars when you retire at age 65. You are 25 years old and you want to make your first savings payment immediately. You have not saved any money for your retirement as of yet. Assume interest rate is 7%, how much money must you set aside per year until and including your 65th birthday?

You would like to save $5,000 today, in preparation for retirement 30 years from now. You...

You would like to save $5,000 today, in preparation for retirement 30 years from now. You have to choose between putting it into one of the two plans describe below: i) Pay no taxes toady, and put the money into an interest-bearing account. When you withdraw the money on retirement, you pay a 20% tax rate on the money taken from the account. (This is how an Individual Retirement Account, or, IRA works) ii) Pay a tax rate of 15%...

You plan to retire at the age of 60. You are now 30 and plan to...

You plan to retire at the age of 60. You are now 30 and plan to save $8,000 per year for retirement, with the first deposit made one year from today. Your mutual fund account offers you 10% of return each year. You expect to live on your retirement fund till age 90 after retirement. Calculate total amount available for retirement at the age of 60. $1,365,510 $1,417,088 $1,315,952 $1,258,146

Suppose you are now 25 years old and just accepted a job offer. You would like...

Suppose you are now 25 years old and just accepted a job offer. You would like to save for retirement, but not sure how much you must set aside. Your new employer offers a retirement plan that provides 5% return per year. The plan does not allow withdrawals before the age of 62. You plan to retire at the age 62. You expect that your life expectancy is 80 years. You believe that that you will need $110,000 per year,...

you would like to retire 20 years from now and have an investment worth $3 million...

you would like to retire 20 years from now and have an investment worth $3 million at that time. Currently, you have $200,000 in your account and plan to add $10,000 to that account each year. What annual rate of return must you earn on average to achieve your goal? a) 10.42% b) 12.77% c) 12.86% d) 14.07% e) 12.25% An investment is expected to produce cash flows of $1,000 at the end of each of the next 6 years,...

Suppose you would like to be able to withdraw $240,000 per year for 30 years you...

Suppose you would like to be able to withdraw $240,000 per year for 30 years you are retired. How much do you need to save for the 45 years you are working reach this goal? Assume that you can earn 5% on your investments during your retirement and 7.5% in the years you are saving. Also, assume begin saving in year 1 and don’t make your first withdraw until year 46.

Suppose that you manage a pension fund that has liabilities of $2 million, $4 million, $8...

Suppose that you manage a pension fund that has liabilities of $2 million, $4 million, $8 million, and $10 million coming due in 1, 2, 3, and 4 years, respectively. You want to invest in bonds whose cash flows will exactly match the liabilities. The following bonds are available: 1-year, 2-year, 3-year, and 4-year annual-coupon bonds selling at par; the yields (YTMs) are 1%, 2%, 3%, and 4%, respectively. What's the necessary dollar amount of investment in 1-year bond today?

Question