Question

bilbo Baggins wants to save money to meet three objectives.

First, he would like to be able to retire 30 years from now with retirement income of $33,500 per month for 25 years, with the first payment received 30 years and 1 month from now.

Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $435,000.

Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $1,275,000 to his nephew Frodo.

He can afford to save $4,400 per month for the next 10 years.

If he can earn an APR of 12 percent before he retires and an APR of 8 percent after he retires, how much will he have to save each month in Years 11 through 30?

Answer 1

monthly payment will be 11,522.06 from year 11 through 30