45.You plan on saving $12,300 at the end of each of the next 20 years and...

45.You plan on saving $12,300 at the end of each of the next 20 years and investing your savings at an annual interest rate of 8%. At the end of year 20 you plan on retiring. You plan on leaving your savings in investments yielding an annual rate of 8% and withdrawing from savings a constant amount for the next 30 years commencing at the end of your first year of retirement. How large a withdrawal can you afford to make?

Select one:a. $68,000b. $27,500c. $39,300d. $50,000e. None of the above

Solutions

Expert Solution

Answer is : d.$50,000

Solution:

Step 1: Find the future value of $12,300 deposited for next 20 years.

We can use the future value of annuity formula:

Where,
FVA = Future Value of Annuity
A = Annuity
i = rate of interest
n = number of years

Substituting the values, we get:

Step 2: Find amount of withdrawal using present value of annuity formula, taking $562,873 as present value of annuity.

Where,
PVA = Present value of annuity
A = Annuity or withdrawal amount
i = Interest rate in decimal form
n = Number of years

We can round it off to $50,000 per year.

Therefore, the answer is d. $50,000

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

You plan on saving $12,300 at the end of each of the next 20 years and...

You plan on saving $12,300 at the end of each of the next 20 years and investing your savings at an annual interest rate of 8%. At the end of year 20 you plan on retiring. You plan on leaving your savings in investments yielding an annual rate of 8% and withdrawing from savings a constant amount for the next 30 years commencing at the end of your first year of retirement. How large a withdrawal can you afford to...

If you deposit $5,000 at the end of each of the next 20 years into an...

If you deposit $5,000 at the end of each of the next 20 years into an account paying 10.8 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years? Show Work.

If you deposit $5,900 at the end of each of the next 20 years into an...

If you deposit $5,900 at the end of each of the next 20 years into an account paying 10.8 percent interest, how much money will you have in the account in 20 years?

At the end of each of the next 8 years, you plan to put $25,000 in...

At the end of each of the next 8 years, you plan to put $25,000 in the bank. If the annual interest rate is 3%, what is the present value of this planned savings stream? What will the bank balance be at the end of the 8 year period? [Hint: once you know the present value of the savings stream, it's easy to work out the future value]

You will be receiving $25,000 at the end of each year for the next 20 years....

You will be receiving $25,000 at the end of each year for the next 20 years. If the correct discount rate for such a stream of cash flows is 10% then what is the present value of the cash flows?

You plan on saving $10,000 a year (as a regular annuity) for the next 30 years. You...

You plan on saving $10,000 a year (as a regular annuity) for the next 30 years. You will then make equal withdrawals for each of the next 25 years (also a regular annuity). If the interest rate is 10% over the first 30 years but only 8% for the remaining 25 years, what will be the amount of each withdrawal? Place answer in the box below and use 2 decimals.

You have an opportunity to invest in an investment plan for the next 45 years. This plan will offer compound interest of 8 percent per year for the next 20 years and 11 percent per year for the last 25 years.

a) You have an opportunity to invest in an investment plan for the next 45 years. This plan will offer compound interest of 8 percent per year for the next 20 years and 11 percent per year for the last 25 years. If you invest $8,000 in this plan today, how much will you accumulate at the end of the 45 years? Choose the correct answer: $505,539.84 $501,516.38 $506,570.12 $509,092.54 $592,394.59 b) Your rich uncle will give you a...

If you deposit $4,800 at the end of each of the next 20 yearsinto an...

If you deposit $4,800 at the end of each of the next 20 years into an account paying 10.8 percent interest, how much money will you have in the account in 20 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Future value$ How much will you have if you make deposits for 40 years?(Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Future value$

If you deposit $9127 at the end of each of the next 28 years into an...

If you deposit $9127 at the end of each of the next 28 years into an account paying 7.6 percent interest, how much money will you have in the account in 28 years? (Round time value factors to 6 decimal places and final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456 should be entered as 123456.)

Suppose you plan to save $6,000 at the end of each coming year for the next...

Suppose you plan to save $6,000 at the end of each coming year for the next 32 years from now for retirement. The interest rate is 4%. How much will you have 32 years from now? Given that you will have $376208.81 saved on the day you retire, how much will you be able to spend each year starting at the end of the first year of retirement, if you want to spend in perpetuity?

Subjects