Question

In: Finance

1.) Sharon is 45 years old and wants to retire at 65. She wishes to make...

1.) Sharon is 45 years old and wants to retire at 65. She wishes to make monthly deposits in an account paying 9% compounded monthly so when she retires she can withdraw $1000 a month for 20 years. How much should she deposit each month? 2.) David works during the summer to help with expenses at school the following year. He is able to save $250 each week for 12 weeks, and he invests it at an annual rate of 7% that is compounded monthly. When school starts, David will begin to withdraw equal amounts from this account each week. What is the most David can withdraw each week for 34 weeks?

can I get some help please?

Solutions

Expert Solution

Formula: The present value of an ordinary annuity (PV)

PV = C× [1-(1+r)^-n]/r

PV = Present value (The cummulative amount available at Present)
C= Periodic cash flow.
r =effective interest rate for the period.
n = number of periods.

PV = 1000× [1-(1+0.75)^-240]/0.75

PV = $111,144.95 (The cummulative amount available at age 65)
C= Periodic cash inflow. $1000
r =effective interest rate for the period. 9%÷12 = 0.75
n = number of periods. 12x20= 240

Formula: The Future Value of an ordinary annuity (FV)

FV= C× {[(1+r)^n]-1}/r

FV = Future value (The cummulative amount available in Future)
C= Periodic cash out flow.
r =effective interest rate for the period.
n = number of periods.

Formula: The Future Value of an ordinary annuity (FV)

$111,144.95= C× {[(1+0.75)^240]-1}/0
75

C= $166.41

FV = $111,144.95 (The cummulative amount needed at age 65)
C= Periodic cash out flow = $166.41
r =effective interest rate for the period. 0.75%
n = number of periods. 240

How much should she deposit each month? = $166.41

jeff jeffy answered 6 months ago
Next > < Previous

Related Solutions

Ms. B is 55 years old and is planning to retire at age 62. She wants...
Ms. B is 55 years old and is planning to retire at age 62. She wants to have a retirement income from that point until age 85. She projects that she will need $5,000 per year during her retirement to supplement her other retirement income. She has accumulated a nest egg $25,000 at this point. Assume that she can invest at a 8% annual rate in the pre-retirement period, that her funds can be invested at a 9% annual rate...
1. George is currently 30 years old, plans to retire at the age of 65 and...
1. George is currently 30 years old, plans to retire at the age of 65 and to live to the age of 85. His labor income is $25,000 per year, and he intends to maintain a constant level of real consumption spending over the next 55 years. Assume no taxes, no growth in real salary, and a real interest rate of 3% per year. a. What is the value of George’s human capital? b. What is his permanent income? c....
Introductory data:Julia Gupta is 40 years old and has never married. She wants to retire at...
Introductory data:Julia Gupta is 40 years old and has never married. She wants to retire at age 62 with an 80% wage replacement ratio. Julia currently earns $100,000 as an employee and has managed to save $100,000 toward her retirement goal (including investment assets and cash equivalents). She is currently saving $5,000 per year in her 401(k) plan. Her employer’s plan calls for a 50% match for contributions.Financial goal:Julia’s primary goal is to retire at age 62 with an 80%...
Ray is 23 years old. She will retire in 40 years. Ray believes that she will...
Ray is 23 years old. She will retire in 40 years. Ray believes that she will live for 35 years after she retires. In order to live comfortably, she thinks she will need to withdraw $35,000 every month. These withdrawals will be made at the end of each period during retirement. Ray wishes to establish a scholarship in Toronto. The scholarship will make annual payments. The first payment will be made 5 years after Ray retires. The amount of the...
Ann E. Belle is age 45 and plans to retire in 20 years (at age 65)....
Ann E. Belle is age 45 and plans to retire in 20 years (at age 65). She has retirement savings in a mutual fund account, which has a current balance of $150,000 (Ann does not plan to add any additional money to this account).  Also, Ann opened a 401K retirement account with her new employer and will contribute $15,000 per year into her 401K until retirement.   If Ann’s mutual fund account grows at an annual rate of 8.0% how much money...
Ann E. Belle is age 45 and plans to retire in 20 years (at age 65)....
Ann E. Belle is age 45 and plans to retire in 20 years (at age 65). She has retirement savings in a mutual fund account, which has a current balance of $150,000 (Ann does not plan to add any additional money to this account). Also, Ann opened a 401K retirement account with her new employer and will contribute $15,000 per year into her 401K until retirement. solve question algebraically and show work. 1.)If Ann’s 401K account grows at an annual...
You are 30 years old and want to retire at the age of age 65 and...
You are 30 years old and want to retire at the age of age 65 and expect to live another 25 years. On the day you retire, you want to have $900,000 in your retirement savings account. a) If you invest monthly starting one month from today and your investment earns 6.0 percent per year, How much money do you need to invest every month until you retire? b) You're retired with $900,000 and you have 25 more years. You...
Hal Thomas, a 25 year old college graduate, wishes to retire at age 65. To supplement...
Hal Thomas, a 25 year old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,000 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will earn a return of 11% over the next 40 years. a. - If Hal makes end-of-year $2,000 deposits into the IRA, how much will he have accumulated in 40 years when he turns 65? b. - If Hal decides to wait until age...
1. You are now 50 years old and plan to retire at age 65. You currently...
1. You are now 50 years old and plan to retire at age 65. You currently have a stock portfolio worth $150,000, a 401(k) retirement plan worth $250,000, and a money market account worth $50,000. Your stock portfolio is expected to provide annual returns of 12 percent, your 401(k) investment will earn 9.5 percent annually, and the money market account earns 5.25 percent, compounded monthly. (12 points) a. If you do not save another penny, what will be the total...
You are now 25 years old. You would like to retire when you are 65 years old.
You are now 25 years old. You would like to retire when you are 65 years old. You want to receive starting at 65 an annual income of $150,000 per year until you are 95. How much money must you have in your retirement account when you are 65? Assume you can earn 4% per annum.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT