Question

I don't really need the answer since I have the answer. I just need to know how to solve them, like what buttons to click on the financial calculator. Please go based on the answer I have provided. Don't use r or c to explain. Only explain using n, i, pv, fv, pmt.

1.)You are 40 years old today and want to plan for retirement at age 65. You want to set aside an equal amount every year from now to retirement. You expect to live to age 95 and want to withdraw a fixed amount each year during retirement that at age 65 will have the same purchasing power as $50,000 has today. You plan on withdrawing the money starting the day you retire. You have $5,000 saved for retirement today. Inflation is assumed to be 4.0% in the future. You expect to earn an 8% return on your investments in the future. How much do you need to save each year until retirement to meet your goal? Age: 40 - 65 N = 65-45= 25 I = 8 PV = 5,000 FV = ?? -1,620,616.024 PMT = ??? 21,699.65 Age: 65 - 95 N = 95-65= 30 I = 8 PV = ?? 1,500,570.392x1.08= 1,620,616.024 FV = 0 PMT = ? $133,291.8166 Age: 40 - 65 N = 25 I = 4 PV = 50,000 FV = ? $133,291.8166 PMT = 0

Answer 1

Answer ) Today purchasing power ( PV) = $50,000 , Inflation (i) =4.0% , Time gap(n) = 65-40 =25 ,

Future Purchasing Power need (FV) = PV( 1+r)ⁿ = $ 50,000 *(1+0.04)²⁵ = $133,291.8166

• Retirement fund required at Age of 65,

N = 95-65= 30, I = 8%, PMT = $133,291.8166 PV = ??

[using function PV(rate,Nper, PMT) =PV(8%,30,$133,291.8166) =$1,500,570.392

As payment start at beginning of year = PV = $1,500,570.392*1.08 = $1,620,616.024.

• save each year until retirement to meet your goal

N = 65-40= 25, I = 8, PV = 5,000 , FV = $1,620,616.024, PMT =?

[Using function PMT(rate,Nper, PV, FV) = PMT(8%,20,5000,-$1,620,616.024) = $ 21,699.95