Question

1.

You plan to save the following amounts

• $3,598 today
• $5,707 per year for the next 3 years
• $7,004 per year for the following 1 years
• $12,497 per year for the following 6 years
• $13,011 per year for the final 5 years

Assuming you earn a 6.1% rate of return during the entire period, how much will you have at the END of the time horizon? Round answer to the nearest dollar.

2. What is the effective annual rate (k_eff) of 10.4% compounded 26 times a year. Round answer to two decimal places in percentage terms (for example 9.22%, not 0.09 or 0.0922). Note that 2 times a year = semiannual, 4 times a year = quarterly, 12 times a year = monthly, 26 times a year = bi-weekly, 52 times a year = weekly, and 365 times a year = daily.

3. You plan to retire in 28 years. At the point of retirement, you want to be able to withdraw 25,682 at the end of each year forever. Assume that you earn a 7.1% rate of return prior to retirement and an 5.69% rate of return after retirement. If you do not want to make any further contributions to your retirement fund, how much do you need today? Round answer to the nearest dollar.

Answer 1

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