Question

In: Finance

Carlton will retire in 40 years. His retirement goal is $4,000,000. He opened a Fidelity a...

Carlton will retire in 40 years. His retirement goal is $4,000,000. He opened a Fidelity a single amount today in an SP500 index. His financial advisor Jordan, informed xpected return of 11.4\% . How much should he invest today to meet his goal?

Solutions

Expert Solution

FV = retirement goal = $4,000,000

n = 40 years

r = expected return = 11.4%

Amount to be invested today = FV / (1+r)^n

= $4,000,000 / (1+11.4%)^40

= $4,000,000 / 75.0598399

= $53,290.8144

Therefore, amount requied to invest today to reach the retirement goal is $53,290.81


Related Solutions

STATE: Andrew plans to retire in 40 years. He plans to invest part of his retirement...
STATE: Andrew plans to retire in 40 years. He plans to invest part of his retirement funds in stocks, so he seeks out information on past returns. He learns that from 1966 to 2015, the annual returns on S&P 500 had mean 11.0% and standard deviation 17.0% . PLAN: The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to Normal. We can use the Central...
peter wants to retire in 20 years. his investment goal at retirement is 2,000,000. how much...
peter wants to retire in 20 years. his investment goal at retirement is 2,000,000. how much must he invest and the beginning of each year to reach his goal if the average rate of return us 12 percent?
Jeremy would like to retire in 25 years. He would like his retirement income to be...
Jeremy would like to retire in 25 years. He would like his retirement income to be $250,000, and this figure should grow at the same rate as inflation, expected to be 2 percent annually. He expects to live 30 years after he retires, and plans to leave $3 million to TYU after he dies. Jeremy currently has $1,000,000 in his retirement fund. The fund is expected to earn 6 percent annually. Assuming that Jeremy increases his annual retirement savings by...
1. Andrew plans to retire in 38 years. He plans to invest part of his retirement...
1. Andrew plans to retire in 38 years. He plans to invest part of his retirement funds in stocks, so he seeks out information on past returns. He learns that over the entire 20th century, the real (that is, adjusted for inflation) annual returns on U.S. common stocks had mean 8.7% and standard deviation 20.2%. The distribution of annual returns on common stocks is roughly symmetric, so the mean return over even a moderate number of years is close to...
A couple will retire in 40 years; they plan to withdraw $39,000 a year in retirement,...
A couple will retire in 40 years; they plan to withdraw $39,000 a year in retirement, and they will make 20 withdraw. They believe that they can earn 8% interest on the retirement savings. - If they make annual deposit into their retirement savings, how much will they need to save each year? Assume the first deposit comes at the end of the first year, and the first withdraw comes at the end of year 41.
Sandeep wants to retire in 15 years and he needs to have $60,000 for a down payment on his retirement home.
Sandeep wants to retire in 15 years and he needs to have $60,000 for a down payment on his retirement home. If he makes quarterly payments into an account paying 7% annual interest compounded quarterly, how much should he deposit each quarter to obtain the desired down payment?
You want to start saving for retirement. Your goal is to retire in 25 years. Assume...
You want to start saving for retirement. Your goal is to retire in 25 years. Assume that you have $25,000 to invest now and that you will contribute $4,800 per year. What will your account be worth when you retire if you can earn 6% a year? What will your account be worth if the 6% annual return is compounded monthly and instead of contributing $4,800 per year, you contribute $400 monthly (you still start with $25,000) Assume all payments...
You are planning on saving for retirement. You wish to retire in 40 years, and you...
You are planning on saving for retirement. You wish to retire in 40 years, and you would like to withdraw an annual sum each year to live on starting 40 years from today - You have determined that you will need $100,000 to live on (in today’s dollars) - You estimate inflation (cost of living) to be 3% - Your estimated rate of return pre-retirement is 10%; in retirement 7% Assume your life expectancy once retired is another 20 years....
A man plans to retire in 25 years and spend 35 years in retirement. He currently...
A man plans to retire in 25 years and spend 35 years in retirement. He currently earns $82,500 before-tax annually, which increases annually with the level of inflation. He has determined that he needs 70% of his pre-retirement income for his retirement years. He currently has $282,000 in his RRSP account and $10,000 in a non-registered account. He will earn 5.50% before retirement and during retirement he will readjust his portfolio to be more conservative earning 3.50%. Inflation is 2%...
Tanner is going to retire tomorrow. He has $1,600,000 in his retirement account. His account earns...
Tanner is going to retire tomorrow. He has $1,600,000 in his retirement account. His account earns 6.00% annually. He wants to make an annual withdrawal of $150,000 from the account. How many years will he be able to make this same withdrawal before the fund runs out of money? 30 years (approx) 22 years (approx) 17.5 years (approx) 27.3 years (approx)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT