Question

#1)
You have begun saving for your retirement. Your starting salary is $60,000, and you invest 10% of your salary each year.
A) If the retirement plan has historically made 10% per year, how much will you have in your account after 40 years?
B) What will be your final contribution in year 40?

#2)
You have decided to purchase a house that needs quite a bit of work right away. You estimate the following yearly maintenance and upkeep costs:

Year Cost
0 $7500
1 $5500
2 $5500
3 $5500
4 $5200
5 $4900
6 $4600
7 $4300
8 $4000
9 $3700
10 $3400

If the interest rate is 8%, how money do you need to set aside when you purchase your house to pay for the first 10 years of maintenance and upkeep costs? Construct cash flow diagrams and show all your work. To receive full credit, you must use an arithmetic gradient.

please do not use excel in solving this problem. help both questions please. Thank you

Answer 1

B.1	If the Retirement Plan made 10% per year , Amout at the end of 40 Years
	It is assumed that Salary gets increased at the rate of 8% per Year
Year	Cash Inflow	Savings (10% of Salary)	Future Value at the Rate of 10%= Cashflow*(1.10)^ Years Invested
1	60000.00	6000.00	246868.67
2	64800.00	6480.00	242380.15
3	69984.00	6998.40	237973.23
4	75582.72	7558.27	233646.45
5	81629.34	8162.93	229398.33
6	88159.68	8815.97	225227.45
7	95212.46	9521.25	221132.41
8	102829.46	10282.95	217111.82
9	111055.81	11105.58	213164.33
10	119940.28	11994.03	209288.62
11	129535.50	12953.55	205483.37
12	139898.34	13989.83	201747.31
13	151090.21	15109.02	198079.17
14	163177.42	16317.74	194477.73
15	176231.62	17623.16	190941.78
16	190330.15	19033.01	187470.11
17	205556.56	20555.66	184061.56
18	222001.08	22200.11	180714.99
19	239761.17	23976.12	177429.26
20	258942.06	25894.21	174203.27
21	279657.43	27965.74	171035.94
22	302030.02	30203.00	167926.20
23	326192.42	32619.24	164872.99
24	352287.82	35228.78	161875.30
25	380470.84	38047.08	158932.11
26	410908.51	41090.85	156042.44
27	443781.19	44378.12	153205.30
28	479283.69	47928.37	150419.75
29	517626.38	51762.64	147684.85
30	559036.49	55903.65	144999.67
31	603759.41	60375.94	142363.31
32	652060.17	65206.02	139774.89
33	704224.98	70422.50	137233.53
34	760562.98	76056.30	134738.37
35	821408.02	82140.80	132288.58
36	887120.66	88712.07	129883.34
37	958090.31	95809.03	127521.82
38	1034737.54	103473.75	125203.24
39	1117516.54	111751.65	122926.82
40	1206917.86	120691.79	120691.79
	Sum accululated at the end of year 40		7060420.22
B.2	Final Contribution at Year 40	Savings at the end of 40 Years	111751.65*1.1+120691.79	243618.6053

2. Amount of Money to setaside to pay for House Maintainence and upkeep Cost
Years	Maintainence and Upkeep Cost	Present Value of upkeep Cost	Present Value of NetCashflow
0	7500	7500	7500.00
1	5500	5500/(1.08)^1	5092.59
2	5500	5500/(1.08)^2	4715.36
3	5500	5500/(1.08)^3	4366.08
4	5200	5200/(1.08)^4	3822.16
5	4900	4900/(1.08)^5	3334.86
6	4600	4600/(1.08)^6	2898.78
7	4300	4300/(1.08)^7	2509.01
8	4000	4000/(1.08)^8	2161.08
9	3700	3700/(1.08)^9	1850.92
10	3400	3400/(1.09)^10	1436.20
Sum of Money to be kept aside			39687.03