Question

Today is Derek’s 25th birthday. Derek has been advised that he needs to have $2,928,661.00 in his retirement account the day he turns 65. He estimates his retirement account will pay 5.00% interest. Assume he chooses not to deposit anything today. Rather he chooses to make annual deposits into the retirement account starting on his 28.00th birthday and ending on his 65th birthday. How much must those deposits be?

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Answer format: Currency: Round to: 2 decimal places.

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#3

Derek can deposit $11,000 on each birthday beginning with his 26th and ending with his 65th. What will the rate on the retirement account need to be for him to have $3,000,000 in it when he retires on his 65th birthday?

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Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

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#4

Derek can deposit $12,898.00 on each birthday beginning with his 29.00th and ending with his 66.00th. What will the rate on the retirement account need to be for him to have $3,908,301.00 in it when he retires?

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Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))

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#5

If Derek plans to deposit $14,674.00 into his retirement account on each birthday beginning with his 26th and the account earns 6.00%, how long will it take him to accumulate $3,254,255.00?

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Answer format: Number: Round to: 2 decimal places.

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#6

Assume the real rate of return is 3.21% and the inflation rate is 5.78%. Find the nominal rate of return using the exact formula.

Answer 1

Q2. We are given the following information

• r	5.00%
  n	65-28 = 37
  T	1
  FV	$      29,28,661.00

• We need to solve the following equation to arrive at the required PMT
• 
• 
• 
• So the annual payment should be $28,817.42

Q3. We are given the following information

• PMT	11000
  n	65-26 = 39
  T	1
  FV	$      3,000,000

• We need to solve the following equation to arrive at the required r
• 
• 
• 
• So the rate should be should be 8.5161%

Q4. We can modify this to read as the end of his 28th year and the end of his 65th year, therefore the number of years = 65-28=37

• We are given the following information

• PMT	$            12,898.00
  n	37
  T	1
  FV	$      39,08,301.00

• We need to solve the following equation to arrive at the required r
• 
• 
•   
• So the rate of return should be 9.65%

Q5. We are given the following information:

• PMT	$            14,674.00
  r	6.00000%
  T	1
  FV	$      32,54,255.00

• We need to solve the following equation to arrive at the required n
• 
• 
• 
• So it will take 45.66 years to accumulate 3254255

Q7.