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In: Economics

QUESTION 2 (16 marks) Ali plans to retire 40 years from now. He expects that he...

QUESTION 2

Ali plans to retire 40 years from now. He expects that he shall live 25 years after retiring. Once retire, Ali estimates that he shall need to spend roughly RM60,000 per year to cover his living expenses, with the first retirement fund withdrawn one year after he retires, and yet still have RM180,000 left in the account at the time of his expected death. Ali expects to earn 6% per year on his money after he retires.

Required:

  1. How much must Ali has in his account so that he enough funds to spend during his retirement period?                 [4 marks]

[your answer here]

  1. How much must Ali deposit each year (in equal amount) in an account, starting one year from today, so that he has enough funds for retirement? [2 marks]

[your answer here]

  1. How much must Ali deposit each year (in equal amount) in an account, starting one year from today, so that he has enough funds for retirement? (Assume fist deposit is made at year 0) [4 marks]
  2. [your answer here]

  1. Refer to your answer in (a). Rather than deposits an equal amount of money each year (as in b), Ali wants to deposit RM2,000 starting one year from today and increase the amount by RM300 each year. Determine whether the amount he has in his account after 40 years would be enough to support his living expenses during retirement period? [6 marks]

[your answer here]

Solutions

Expert Solution

If you find the answer helpful then plz upvote

Some times we all do make mistake please let me know

Rahul Sunny answered 2 years ago
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