Question

. A couple want to have $1,500,000 when they retire in 10 years. They have $700,000 today and plan to invest $1000 every month for the next ten years.

What annual rate must they earn on their investment to reach their goal? 5 points

If they earn 7% a year on their investment how much will they have at the end of the ten years 5 points

The following is based on the amount in the account after earning 7%.

After retiring they start to withdraw $10,000 at the beginning of every month for the next 30 years. They earn 5% a year. How much will they have at the end of the 30 years?   5 points

Answer 1

1)

Future value of the investment(FV) = $ 1,500,000

PV of investment = 700,000

Number of periods = 10* 12 = 120 months

Monthly investment (PMT) = 1000

Annual rate = = 0.54 % per month = 6.45% pa

2)

Rate = 7% pa = 7%/`12 per month

PV of investment = 700,000

Number of periods(nper) = 10* 12 = 120 months

Monthly investment (PMT) = 1000

Future value of investment (FV) = = $ 1,579,847.77

3)

PV of retirement corpus = $ 1,579,847.77

Withdrawal amount (PMT) = 10,000

Number of years(nper) = 30*12 = 360 months

Rate = 5% pa = 5%/12 per month

Amount at the end of 30 years (FV) =

= $ 1,298,907.90