Question

~~~In Excel~~~ Question 1: Today is your 22nd birthday (this is beginning of period, i.e., time...

~~~In Excel~~~

Question 1: Today is your 22nd birthday (this is beginning of period, i.e., time 0). You expect to retire at age of 60 and actuarial tables suggest that you will live to be 85. Starting on your 60th birthday and ending on your 84th birthday (all withdrawals are at the beginning of the year), you will withdraw $50,000 for annual living expenses. Assume the interest rate to be 5%.

Calculate the amount needed on your 60th birthday to pay for your annual living expenses over your retirement using the timeline method. (14 points)

How much do you need to save per year if you start saving today (i.e, at the beginning of year) and save until you are 59 (i.e., you make the last payment on your 59th birthday)? (6 points)

~~~In Excel~~~

what are the inputs used to solve this in excel

Homework Answers

Answer #1

a). PVAD = P + P[{1 - (1 + r)-(n-1)} / r]

= $50,000 + $50,000[{1 - 1.05-(25 - 1)} / 0.05]

= $50,000 + $50,000[0.6899 / 0.05]

= $50,000 + $50,000[13.7986]

= $50,000 + $689,932.09 = $739,932.09

b). PVAD = P + P[{1 - (1 + r)-(n-1)} / r]

$739,932.09 = P + P[{1 - 1.05-(38 - 1)} / 0.05]

$739,932.09 = P + P[0.8356 / 0.05]

$739,932.09 = P + P[16.7113]

P[16.7113] = $739,932.09 - P

P = [$739,932.09/16.7113] - [P/16.7113]

P = $44,277.38 - P[0.05984]

P + P[0.05984] = $44,277.38

P = $44,277.38/1.05984 = $41,777.43

In Excel,

The function that we use for present value of an annuity due on an Excel spreadsheet is:
=PV(rate,N,pmt,fv,type) OR.
=PV(0.05,24,-50,000,1)
Type 0 is for an ordinary annuity while Type 1 is for an annuity due.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
~~~In Excel~~~ Question 1: Today is your 22nd birthday (this is beginning of period, i.e., time...
~~~In Excel~~~ Question 1: Today is your 22nd birthday (this is beginning of period, i.e., time 0). You expect to retire at age of 60 and actuarial tables suggest that you will live to be 85. Starting on your 60th birthday and ending on your 84th birthday (all withdrawals are at the beginning of the year), you will withdraw $50,000 for annual living expenses. Assume the interest rate to be 5%. Calculate the amount needed on your 60th birthday to...
Today is your 40th birthday (this is beginning of period, i.e., time 0). You expect to...
Today is your 40th birthday (this is beginning of period, i.e., time 0). You expect to retire at age 65 and actuarial tables suggest that you will live to be 85. You want to move to Hawaii when you retire (on your 65th birthday). You estimate that it will cost you $50,000 to make the move on your 65th birthday. Starting on your 65th birthday and ending on your 84th birthday (all withdrawals are at the beginning of the year),...
Your friend is celebrating her 22nd birthday today and wants to start saving for her anticipated...
Your friend is celebrating her 22nd birthday today and wants to start saving for her anticipated retirement at age 60. She estimates that the annual spending needs would be $210,000 based on the current price level, and inflation rate is expected to be 4% per year. She wants to be able to make withdrawal for spending needs on each year for 24 years following her retirement; the first withdrawal will be on her 61st birthday. Your friend intends to invest...
Today is your 40th birthday. You expect to retire at age 65, and actuarial tables suggest...
Today is your 40th birthday. You expect to retire at age 65, and actuarial tables suggest that you will live to be 100. You want to move to Hawaii when you retire. You estimate that it will cost you $200,000 to make the move (on your 65th birthday). Starting on your 65th birthday and ending on your 99th birthday, your annual living expenses will be $25,000 a year. You expect to earn an annual return of 7% on your savings.  ...
Happy​ birthday! You are 30 years old today. You want to retire at age 60. You...
Happy​ birthday! You are 30 years old today. You want to retire at age 60. You want to have ​$1,800,000 at retirement. ​ Realistically, you know that the most that you can save from your 31st birthday until your 50th is ​$5,500 per year​ (you only save on your​ birthdays!). How much do you have to save each year from your 51st to your 60th birthday in order to achieve your retirement goal if you can earn 6​% on your​...
Can you Solve it in Excel Please Today is your 25th birthday.  You have decided that it...
Can you Solve it in Excel Please Today is your 25th birthday.  You have decided that it is necessary to plan your own retirement since you are not confident that government benefits will be available when you retire.  You will make annual payments into an account earning 5% APY starting on your next birthday (26th) a year from now.  Your last payment will occur on your 70th birthday.  You have decided that you need to plan for payments of $500,000 per year and that...
. It is your 6th birthday today. You have a trust fund with $50,000 that is...
. It is your 6th birthday today. You have a trust fund with $50,000 that is earning 8% per year. You expect to withdraw $30,000 per year for 7 years starting on your 22nd birthday for graduate school. How much money will be left in the trust fund after your last withdrawal (rounded to the nearest $10)?         
Your friend Ellen is celebrating her 25th birthday (i.e., she is 25 today) and wants to...
Your friend Ellen is celebrating her 25th birthday (i.e., she is 25 today) and wants to start saving for her anticipated retirement at age 55. She wants to be able to withdraw $10,000 from her savings account on each birthday for 10 years following her retirement (the first withdrawal will be on her 56th birthday). Ellen intends to invest her money in the local saving bank, which offers 8% (EAR) interest per year. Suppose Ellen wants to make 24 deposits...
Today is your 21st birthday and you just decided to start saving money so you can...
Today is your 21st birthday and you just decided to start saving money so you can retire early. Thus, you are going to save $500 a month starting one month from now. You plan to retire as soon as you can accumulate $1 million. If you can earn an average of 8%on your savings, how old will you be when you retire?
Do the following question on a worksheet entitled ”Loan”. You have just turned 21 and start...
Do the following question on a worksheet entitled ”Loan”. You have just turned 21 and start to make plans for your future retirement (it is never too early). You would like to retire at 55 and enjoy the life. To do so, you understand that you have to plan to start saving ASAP. You want to be able to F2019 Econ 311 Assignment 2 Page 5 withdraw $24,000 annually starting with your 56th birthday and ending with your 75th birthday,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT