Question
In: Finance
Mr. X wants to save money to meet three objectives. First, he wants to retire after...
Mr. X wants to save money to meet three objectives. First, he wants to retire after 30 years, and for the subsequent 25 post-retirement years, he wants to have an income of $20,000 per month, with the first post-retirement income received 30 years and one month from now. Second, he wants to buy a vacation cabin in 10 years at an estimated cost of $375,000. Third, at the end of 25 years of retirement, he wants to have $2 million. He is currently saving $2500 per month and wishes to do so for the next 10 years, till he buys the cabin. He earns 9.6% APR, compounded monthly, from his savings and we can assume that this will be the rate till retirement. However, after retirement the interest rate is 7% EAR.
- How much money will he need at the time of retirement (that is, at the end of 30 years) in order to be able to withdraw $20,000 per month for 25 years and leave a bequest of $2 million?
- Will he be able to accumulate this amount if he continues to save $2500 per month till retirement? What will be the short-fall?
- If he saves at the rate of $2500 per month for 10 years till he buys the cabin, what should his monthly savings be for year 11 to 30 in order to fulfill his objectives?
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
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