Question

You must show your work for credit. Simply giving the final answer is not sufficient; you...

You must show your work for credit. Simply giving the final answer is not sufficient; you must explain and show how you arrived at each answer. Ignore all taxes in your

Your sister turned 20 today. She is planning to save $5,000 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% per year, compounded annually. She plans to retire 40 years from today, when she turns 60, and she expects to live for 25 years after retirement, to age 85. Under these assumptions, how much can she spend each year after she retires without running out of money, if she can earn 9% per year (again, compounded annually) on her investments during her retirement? Assume that her withdrawals also occur at the end of the year (so her first withdrawal will be made at the end of her first retirement year).

Homework Answers

Answer #1

First we have to find the accumulated value after 40 years with FV function in EXCEL

=FV(rate,nper,pmt,pv,type)

rate=7%

nper=number of periods=40

pmt=5000

pv=0

type=0

=FV(7%,40,-5000,0,0)

FV=$998,176

The accumulated value after 40 years=$998,175.56

==>Now we have to find the annual withdrawls for 25 years with PMT function in EXCEL

=PMT(rate,nper,pv,fv,type)

rate=9%

nper=25

pv=998,175.56

fv=0

type=0

=PMT(9%,25,998175.56,0,0)=$101,620.51

The annual withdrawls for 25 years=$101,620.51

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
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...
Your sister turned 35 today, and she is planning to save $40,000 per year for retirement,...
Your sister turned 35 today, and she is planning to save $40,000 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...
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...
Your sister turned 35 today, and she is planning to save $7,500 per year for retirement,...
Your sister turned 35 today, and she is planning to save $7,500 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that will provide a return of 8.0% 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 in each year after...
Your older brother turned 35 today, and he is planning to save $20,000 per year for...
Your older brother turned 35 today, and he is planning to save $20,000 per year for retirement, with the first deposit to be made one year from today. He will invest in a mutual fund that's expected to provide a return of 7.5% per year. He plans to retire 30 years from today, when he turns 65, and he expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can he spend each year...
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...
Ashley turned 30 today, and she is planning to save $3,000 per year for retirement, with...
Ashley turned 30 today, and she is planning to save $3,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund, which she expects to provide a return of 8.20% per year throughout her lifetime. She plans to retire 35 years from today, when she turns 65, and she expects to live for 30 years after retirement, to age 95. Under these assumptions, how much can she spend...
You turn 35 today, and you plan to save $2,000 each month for retirement, with the...
You turn 35 today, and you plan to save $2,000 each month for retirement, with the first deposit made at the end of this month. You plan to retire 30 years from today, when you turn 65, but you're not sure how long you can expect to live after retirement, so you want the payments to go on forever. Under these assumptions, how much can you spend each month after you retire? Your first withdrawal will be made at the...
Marie just turned 28 and are now seriously planning for her retirement. Marie wishes to retire...
Marie just turned 28 and are now seriously planning for her retirement. Marie wishes to retire two years earlier than the mandatory retirement age of 65. She hopes to be able to make end-of-month withdrawals from her retirement account of $25,000 per month for a 30-year period after that. Marie's plan is to fund her retirement by making monthly deposits between now and when she retires. The initial monthly deposit will be made at the end of the coming month....
You and your wife are making plans for retirement. You plan on living 25 years after...
You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $95,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 15% annually. Do not round intermediate calculations. Round your answers to the nearest cent. What amount do you need in your retirement account the day you retire? $ Assume that your...