Question

Sofia just graduated from college and she is starting her new job today. Her new employer...

Sofia just graduated from college and she is starting her new job today. Her new employer gave her a $15,000 signing bonus that she will invest today. She plans to retire 50 years from today (i.e., at the end of year 50). Once she retires, she would like to be able to withdraw from her retirement account $180,000 at the end of each year, starting the year after she retires (i.e., year 51). She expects that her retirement will last for 20 years (and the amount in her account after that should be 0). If Sofia can earn a return of 9% on her investments for the first 50 years and then 4% once she retires, how much money (in equal payments) does she need to save and invest each year in the first 50 years of her life to meet her goal (she invests ar the end of the year, i.e. this an ordinary annuity)? Round to the nearest 2 decimal places - if for example the answer is 7,345.567 then round it to 7,345.57.

Homework Answers

Answer #1

1.
Calculation of amount required at the time of retirement:

PMT = $180,000
Nper = 20
Rate = 4%
FV = 0

Amount required at the time of retirement can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(4%,20,-180000,0)
= $2,446,258.74

Calculation of annual deposit:

FV = $2,446,258.74
Rate = 9%
Nper = 50
PV = $15,000

Annual deposit can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(9%,50,15000,-2446258.74)
= $1,632.83

Annual deposit = $1,632.83

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
Sofia just graduated from college and she is starting her new job today. Her new employer...
Sofia just graduated from college and she is starting her new job today. Her new employer gave her a $15,000 signing bonus that she will invest today. She plans to retire 50 years from today (i.e., at the end of year 50). Once she retires, she would like to be able to withdraw from her retirement account $180,000 at the end of each year, starting the year after she retires (i.e., year 51). She expects that her retirement will last...
A newly-graduated engineer begins her job on her 24th birthday, and beings contributing to her retirement...
A newly-graduated engineer begins her job on her 24th birthday, and beings contributing to her retirement account the following month. Her company has agreed to match her contributions up to 4% of her salary, so she elects to contribute 4% to get the full company match (so the total contribution to the fund is 8%). Her starting monthly salary is $5000, and it’s expected to increase an average of 3% per year (or 0.25% per month). Her nominal annual MARR...
A newly-graduated engineer begins her job on her 24th birthday, and beings contributing to her retirement...
A newly-graduated engineer begins her job on her 24th birthday, and beings contributing to her retirement account the following month. Her company has agreed to match her contributions up to 4% of her salary, so she elects to contribute 4% to get the full company match (so the total contribution to the fund is 8%). Her starting monthly salary is $5000, and it’s expected to increase an average of 3% per year (or 0.25% per month). Her nominal annual MARR...
Mrs. X turned 45 today, and she is planning to save $17,000 per year for retirement,...
Mrs. X turned 45 today, and she is planning to save $17,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 5.5% per year. She plans to retire 20 years from today, when she turns 65, and she expects to live for 20 years after retirement, to age 85. Under these assumptions, how much can she spend each year after...
Suppose Rachel wishes to retire fifty years from today. She needs $8,000 per month once she...
Suppose Rachel wishes to retire fifty years from today. She needs $8,000 per month once she retires, with the first retirement funds withdrawn one month from the day Rachel retires. Rachel estimates that she will earn effective annual rate of 3.66% on her retirement funds. Rachel also believes she will need funds up and including her 40th birthday after retirement. How much must she deposit each year in her retirement funds, so that she has enough funds for retirement?
Your sister turned 35 today, and she is planning to save $30,000 per year for retirement,...
Your sister turned 35 today, and she is planning to save $30,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 7.5% per year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can she spend each year after...
You just graduated from college and are starting your new job. You realized the importance to...
You just graduated from college and are starting your new job. You realized the importance to save for the future and have figured out that you will save $3,000 per quarter for the next 12 years; and then increase to $7,000 per quarter for the following 4 years. The amount accumulated at the end of these investments will be your retirement egg nest. You plan to start retirement and start withdrawing quarterly amounts the following quarter (you will be in...
This is the beginning of a new year. Having just graduated from college with a degree...
This is the beginning of a new year. Having just graduated from college with a degree in finance, you landed a job as a personal finance counselor with a large wealth management firm. Your very first client is a young couple who want to put their financial business in order and develop a plan for their retirement and future family needs. Both the husband and the wife are 31 years old and in stable employment. They want to retire together...
You want to buy a condo 5 years from now, and you plan to save $1,500...
You want to buy a condo 5 years from now, and you plan to save $1,500 per year, beginning one year from today. You will deposit the money in an account that pays 4% interest. How much will you have just after you make the 5th deposit, 5 years from now? (Round final answer to 2 decimal places. Omit the "$" sign in your response.) Your sister turned 45 today, and she is planning to save $4800 per year for...
Sarah just graduated from college. She plans to purchase a home in 8 years and will...
Sarah just graduated from college. She plans to purchase a home in 8 years and will need $30000 for a down payment. She starts an investment account with an initial deposit of $2000. If Sarah can earn 9% in her investment account on the initial deposit and future deposits, what is the amount of annual payment that Sarah must make at the end of each year for 8 years? Show all computations.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT
Active Questions
  • For long term deposits, Commercial Bank pays 6.5% per annum, while Bank National pays 6.4%per annum...
    asked 3 minutes ago
  • A) What are the main differences between a) pre-transcriptional control, b) post-transcriptional control, and c) post-translational...
    asked 4 minutes ago
  • The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to...
    asked 4 minutes ago
  • Given the following information: Information Original Budget Actual Units produced 1,000 units 970 units Materials (kg)...
    asked 6 minutes ago
  • A newly discovered toxin is known to impact female fertility. It acts to block hormones from...
    asked 6 minutes ago
  • MobileCash Corporation operates a fleet of armoured cars that make scheduled pickups and deliveries for its...
    asked 7 minutes ago
  • Managing Pension cost is a challenge for every Administration. If you are the Chief of NYC...
    asked 7 minutes ago
  • Do you think it’s appropriate for countries within the EU to prohibit foreign direct investment within...
    asked 8 minutes ago
  • Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment...
    asked 17 minutes ago
  • Calculate the duration of a 2-year bond with 8% semiannual coupon selling at par if interest...
    asked 17 minutes ago
  • Corporate governance is an essential condition to the establishment of a stock market, attracting major investment...
    asked 18 minutes ago
  • Gadget Lubricants expects the following sales in units in the last quarter (Oct-Dec) of 2019: Oct...
    asked 18 minutes ago