You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,050 a month in a stock account in real dollars and $530 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 10 percent, and the bond account will earn 6 percent. When you retire, you will combine your money into an account with an effective annual return of 8 percent. The inflation rate over this period is expected to be an effective annual rate of 3 percent.
How much can you withdraw each month from your account in real terms assuming a withdrawal period of 25 years? Monthly withdrawal =$
What is the nominal dollar amount of your last withdrawal? Last withdrawal =$
| D | L | O | ||||||||||||
| future value of annuity: | Fisher equation to calculate the real rate : (1+R)= (1+r)(1+h) | 10%= | 0.067961 | 6%= | 0.029126 | |||||||||
| calculation: | 8%= | 0.048544 | ||||||||||||
| stock account | FVA | = | $1,230,610.813 | FV(L2/12,360,-1050) | ||||||||||
| bond account | FVA | = | $304,269.488 | |||||||||||
| Total | $1,534,880.301 | (amt accumulated at retirement) | ||||||||||||
| monthly withdrawal | = | $8,843.01 | PMT(O3/12,25*12,-D7) | |||||||||||
| nominal dollar amount of last withdrawal | $44,941.48 | FV(0.03,30+25,,-D10) | ||||||||||||
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