Question

You just started this MHA. You are looking forward to the day that you are done and gainfully employed. You really liked this new Honda Accord that just came out (because one of your professors used to work for Honda). Today the cost of that car is $32,000. You are smart and you know you need to put money away today – so that in FIVE years, you can purchase it. You are going to put your money away in index fund that will earn 7% interest. Annual inflation is expected to be 3.2%. How much money do you need to invest today to be able to afford that car?

you decided that you want to put $50,000 you have in savings today into a retirement account. The account will have an average annual return of 8%. You are currently 30 years old. You will need these funds when you retire at age 65 (35 years from now). How much money will that be?

How much do I need to retire? Here are your assumptions. You are 30. You will retire when you are 65. You want $40,000 a year when you retire. You will be an aggressive investor today and have an average market return of 9%. When you retire, you will be conservative in your investing and get into bonds that have a market return of 4.5%. You expect that inflation will be 3%. You currently have $20,000 in savings as of today. You are expecting to live until 85. How much do you need to have saved when you turn 65? (Hint: if you want to work out how much you need to save every year, under PMT, it will be 36 years)

Answer 1