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2. You are planning to save for retirement over the next 40
years. To do this, you will invest $900 per month in a stock
account and $500 per month in a bond account. The return of the
stock account is expected to be 8 percent per year (compounded
monthly), and the bond account will pay 6 percent per year
(compounded monthly). When you retire, you will combine your money
into an account with a 4 percent per year return (compounded
monthly). How much can you withdraw each month from your account
assuming a 25-year withdrawal period?
| Financial calculator | ||
| INPUTS | ||
| Investment in stock account | PMT | -900 |
| Term in months= 40*12 | N | 480 |
| Rate per month | I/Y | 0.666666667 |
| Find | ||
| Future value of amount in stock account | FV | $3,141,907.05 |
| Investment in bond account | PMT | -500 |
| Term in months= 40*12 | N | 480 |
| Rate per month | I/Y | 0.5 |
| Find | ||
| Future value of amount in stock account | FV | $995,745.37 |
| Total amount accumulated on retirement | $4,137,652.42 | |
| Financial calculator | ||
| INPUTS | ||
| Amount available on retirement | PV | -$4,137,652.42 |
| Term in months | N | 300 |
| Interest rate per month | I/Y | 0.333333333 |
|
FIND Monthly withdrawal |
PMT | $21,840.05 |
Monthly withdrawal = $ 21840.05
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