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 question. Round your answer to the nearest whole number.

Expert Solution

PV of Annuity:

Annuity is series of cash flows that are deposited at regular intervals for specific period of time. Here cash flows are happened at the end of the period. PV of annuity is current value of cash flows to be received at regular intervals discounted at specified int rate or discount rate to current date.

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
r - Int rate per period
n - No. of periods

Particulars	Amount
Cash Flow	$ 65,000.00
Int Rate	12.0000%
Periods	20

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
= $ 65000 * [ 1 - [(1+0.12)^-20]] /0.12
= $ 65000 * [ 1 - [(1.12)^-20]] /0.12
= $ 65000 * [ 1 - [0.1037]] /0.12
= $ 65000 * [0.8963]] /0.12
= $ 485513.84
Amount deposited at 55 Years:

Amount inherited = $ 340000

Amount spent on Home = $ 90000

Amount deposited for retirement = $ 250000 ( $ 340000 - $ 90000 )

Future Value:

Future Value is Value of current asset at future date grown at given int rate or growth rate.

FV = PV (1+r)^n
Where r is Int rate per period
n - No. of periods

Particulars	Amount
Present Value	$ 250,000.00
Future Value	$ 485,513.84
Periods	10

Future Value = Cash Flow * ( 1 + r )^n
$ 485513.84 = $ 250000 ( 1 + r ) ^ 10
( 1 + r ) ^ 10 = $485513.84 / $250000
( 1 + r ) ^ 10 = 1.9421
( 1 + r ) = 1.9421 ^ ( 1 / 10 )
( 1 + r ) = 1.0686
r = 1.068627 - 1
r = 0.068627 i.e 6.86 %

Pls comment, if any further assistance is required.

jeff jeffy answered 2 years ago

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.

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...

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.

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...

A 55-year-old female patient comes into the clinic who was recently who was recently diagnosed with...

A 55-year-old female patient comes into the clinic who was recently who was recently diagnosed with type 2 diabetes after her visit to a health fair. As the nurse, you initiate patient education on basic diabetic care and the woman asks questions about diet and exercise and how these relate to blood glucose levels. Find an appropriate piece of education material for this patient from the list of resources and explain to the patient why these are important.

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...

1. Mary’s husband Ben died during the current year. She was the beneficiary of his life...

1. Mary’s husband Ben died during the current year. She was the beneficiary of his life insurance policy in the face amount of $300,000. Because Mary likes to go on expensive vacations, she is concerned that she will spend all the money in a few months. She decides to leave the money with the insurance company and will take the money out over a period of ten years. In the current year, Mary receives a check for $34,000 from the...

Mrs. Angel is a 89-year-old woman. She has a retirement pension. Her husband died a year...

Mrs. Angel is a 89-year-old woman. She has a retirement pension. Her husband died a year ago. She stays at her daughter's house. Her daughter works in a factory. Her daughter's husband, Ahmet, is an unemployed, alcoholic man with sexual problems. They have a four-year-old child. Mrs Angel is brought to the emergency unit by her daughter and Ahmet with severe abdominal pain. On physical examination, she was found to have vaginal bleeding, as well as bruises on her legs...

Entrepreneurship Case: David Perlman David Pearlman recently left his old firm to start his own company....

Entrepreneurship Case: David Perlman David Pearlman recently left his old firm to start his own company. Only a week into his new business, and still working out of his parents' house, he heard a knock at the door. It was a summons—his old employer was suing him for $100,000 and seeking to shut down his new business. (Perlman Case) After he gets up from the floor, what should he do? Could he have taken steps to mitigate the risk of...

Question