Question

In: Finance

Uncle Fred recently died and left $305,000 to his 50-year-old favorite niece. She immediately spent $90,000...

Uncle Fred recently died and left $305,000 to his 50-year-old favorite niece. She immediately spent $90,000 on a town home but decided to invest the balance for her retirement at age 65. What rate of return must she earn on her investment over the next 15 years to permit her to withdraw $70,000 at the end of each year through age 80 if her funds earn 8 percent annually during retirement? Round your answer to the nearest whole number.

Expert Solution

Money received by the Niece= $305,000

Money spent= $90,000

Money remaining= $(305,000-90,000)= $215,000

The neice only has $215,000.

The niece wants to earn an annuity of $70,000 per year for 15 years at an interest of 8% per year, thus we first need to know what amount of money she would need to invest in her retirement to get $70,000 per year. For that we will use the formula here C is the annuity=$70,000, i is the interest rate= 8% and n is the period of annuity=15

Thus by substituting the value we get=

on solving this equation you will get =

further solving it will give you = 70000*8.56= $599,163.51

ALTERNATE OPTION- you may alternatively use excel's PV function and put the values as rate=0.08, nper=15, PMT=70,000, FV=0 and press enter. You will get the same answer in negative due to some error in excel,but you can convert it to positive on your own.

The total money she needs at the time of her retirement is $599,163.51.

Currently she has $215,000, thus we now need to know in what rate of interest she should invest this money to have $599,163.51 in 15 years when she will retire. For this you may use a financial calculator or EXCEL

Use the Rate function in the excel and put nper=15, PMT=0, PV=-215,000 (you need to put this in negative because of some error in excel) and FV= $599,163.51.

The rate she would need to invest $215,000 to get an annuity of $70,000 for 15 years from her retirement is 7.07% or 7% as the question asks us to round it off to a whole number.

jeff jeffy answered 2 months ago

Uncle Fred recently died and left $340,000 to his 55-year-old favorite niece. She immediately spent $90,000...

Uncle Fred recently died and left $340,000 to his 55-year-old favorite niece. She immediately spent $90,000 on a town home but decided to invest the balance for her retirement at age 65. What rate of return must she earn on her investment over the next 10 years to permit her to withdraw $65,000 at the end of each year through age 85 if her funds earn 12 percent annually during retirement? Use Appendix A and Appendix D to answer the...

Case Scenario Your favorite seventy-two-year-old Uncle Bob recently slipped on the ice and broke his left...

Case Scenario Your favorite seventy-two-year-old Uncle Bob recently slipped on the ice and broke his left hip. After surgery and a four-day hospital stay, the hospital is ready to discharge him. His physician believes Uncle Bob would benefit from a stay at a skilled nursing facility where he would receive skilled nursing, physical therapy and occupational therapy. The physician writes the order. Your Uncle Bob has Medicare A and Medicare B. Questions 1. Will Medicare cover his skilled nursing facility...

A 50 year old male presents to the ER complaining of severe pain in his left...

A 50 year old male presents to the ER complaining of severe pain in his left toe. The pain was sudden in onset and he describes the pain as sharp and non radiating. He is having difficulty bearing weight on his foot. His past medical history is significant for essential hypertension which is well controlled with an Ace inhibitor. Examination is significant for an inflamed first metatarsal phalangeal joint. In passing, he states that he enjoys a good meal, like...

You are watching your niece who is almost a year old and notice that she is...

You are watching your niece who is almost a year old and notice that she is unconscious on the floor with marbles around her. Breaths don’t go in.

A 50-year-old woman suddenly felt numbness and weakness of the left upper and lower limb. She...

A 50-year-old woman suddenly felt numbness and weakness of the left upper and lower limb. She was immediately admitted at a near-by hospital and diagnosed with Right MCA syndrome. The patient is referred for physiotherapy. Assessment revealed Brunnstrom grade 2 and hemisensory loss mainly involving the upper and lower extremity. She presented with, DTR: Left upper and lower extremity brisk, Passive Full ROM of all extremities in all planes of motion a) List ANY FIVE Facilitatory and ANY FIVE Inhibitory...

Cartman was just left half of his grandmother’s estate after she died. Since he isn’t really...

Cartman was just left half of his grandmother’s estate after she died. Since he isn’t really sure what to do with his newfound wealth, he decides to work with a financial planner. As a part of the financial plan, the advisor recommends adjusting his inherited portfolio of C.D.’s and T-bills into an investment policy that more closely resembles Cartman’s goals, risk tolerance, and time horizon. Although Cartman sees how this would normally make sense, he told the advisor he preferred...

Rob is 84 years old, and his wife of 60 years recently died from a long-term...

Rob is 84 years old, and his wife of 60 years recently died from a long-term illness. Rob has been experiencing some health concerns and is finding managing on his own difficult. Donna is meeting with Rob to plan for the provision of home and community care services. Donna notes that Rob is articulate and neatly dressed. His home is a little dusty, but well organised. Rob is a little thin and admits that he is not a very good...

Kathy is a 50-year-old female who has been a jogger for several years. She has recently...

Kathy is a 50-year-old female who has been a jogger for several years. She has recently been diagnosed with osteoarthritis. She has been taking ibuprofen for 3 months but states that “it does not help” and hurts her stomach. The health care provider prescribes celecoxib (Celebrex) 100 mg orally twice a day. a) Kathy expresses concern about all the recent news about heart problems and celecoxib (Celebrex). What information should be included in a teaching plan to help her understand...

Tom is 50-year-old male who presents with distal lateral subungual onychomycosis of his left great toe....

Tom is 50-year-old male who presents with distal lateral subungual onychomycosis of his left great toe. He has had symptoms for four months. On exam, he also appears to have interdigital tinea pedis. Referring to clinical guidelines, what is the first-line treatment for both tinea pedis and onychomycosis in adults? What medication precautions does the patient need to be educated on? What kind of follow-up does the patient require?

The plaintiff's 18 year old son died suddenly at home. His body was taken to the...

The plaintiff's 18 year old son died suddenly at home. His body was taken to the hospital, where the cause of death could not be found without an autopsy. The deputy medical examiner ordered a postmortem examination. The plaintiff was a member of the jewish orthodox faith and refused the postmortem examination of his son on the basis that religious conviction prohibited any molestation of the body after death. Is freedom of religion curtailed by a law that has a...