Question

You want to have $100,000 to pay for one year of living expenses after you retire. You already have some money saved up, so you won’t need this money until long after you retire. You plan to have it invested for 50 years. However, you don’t know how much risk you’re willing to take on the investment. You are debating between two investments: Investment 1: An S&P 500 index fund, which has averaged 8.6% annual return since World War II Investment 2: Invests 90% in the S&P 500 index and 10% in US Treasuries, and has achieved an average 8.1% annual return since World War II.

a) How much do you need to invest now if you choose investment 1?

b) How much do you need to invest now if you choose investment 2?

Answer #1

We are reqiured to find the preaent value (PV)

a) How much do you need to invest now if you choose investment 1?

answer -

from the question we have the following inputs : FV is $100000, n = 50 years, Rate of interest (r) = 8.6%

PV = FV/ (1 + r)^{n} = 100000/ (1 +
0.086)^{50 } = 100000/61.8716 = 1616.25

Hence, you need to invest **$1616.25** now if you
choose investment 1

b) How much do you need to invest now if you choose investment 2?

Answer -

rom the question we have the following inputs : FV is $100000, n = 50 years, Rate of interest (r) = 8.1%

PV = FV/ (1 + r)^{n} = 100000/ (1 +
0.081)^{50 } = 100000/49.1230 = 2035.7063

Hence, you need to invest **$2035.7063** now if you
choose investment 2

Suppose you are 30 years old and want to retire at the age of
age 70 and expect to live another 20 years. On the day you retire,
you want to have $1,000,000 in your retirement savings
account.
i. If you invest monthly starting one month from today and your
investment earns 6.0 percent per year, How much money do you need
to invest every month until you retire?
ii. Now you’re retired with $1,000,000 and you have 20 more...

1. You want to retire and have annual payments of
$55,000 over a 23 year period. You plan to retire in 16
years. If you can earn 7.5% on your funds, how much do
you need to invest monthly until you retire to reach your goal?
2. You have a choice of $1 million in 50 years or
$1,600 today. If your interest rate is 14%, which would
you choose? (show your work to receive credit).
3. You are looking at 2 investments. One
will pay you $550...

You want to have $2 million when you retire in 30 years. You
believe you can earn 7 percent per year on your investment.
a. How much must you invest each month to achieve your goal when
you retire?
b. What if you have the option to invest once every year? What
would be the difference in annual payment in comparison with part
a)?

Calculating Present Values. You have decided that you want to be
a millionaire when you retire in 45 years. If you can earn an
annual return of 11 percent, how much do you have to invest today?
What if you can earn 5.5 percent?

You are 35 years old, and have not saved any money yet. You hope
to retire at age 65, with a sustainable income of $150,000 per year
of current buying power. You assume that inflation will be 3.1% and
the fund you want to invest in will return 8.49% per year from now
until your death.
a) What is your real rate of return? _____
b) How much money do you need in today's dollars to reach your
income goal?...

1.You are 18 today want to retire at age 65.
Starting with the day of your retirement, you would like to have an
annuity initially in the amount of $35,000 per year (but growing at
a 3% annual rate) for 35 years. You
will inherit $30,000 from your long lost uncle when you turn 34 and
save that money as part of your financial plan. Assume an interest
rate of 7% for all periods? How much must you put into...

3(a). You want to retire 50 years from now, and you want access
to ten million dollars ($10,000,000) when you do. You decide to put
some money towards buying a certificate of deposit that’ll be worth
10 mil in 50 years. The CD has an annual interest rate of 8%, and
it compounds quarterly. How much do you have to put into this
deposit?3
(b). Let’s say you put an equal amount of money into a simple
interest account with...

.A risk-free investment promises to pay you $550 every 6 months
for the next 11 years. If you can earn 9.5% on your money, how much
would you be willing to pay for this investment?
You want to retire and have annual payments of $50,000 over a 20
year period. You plan to retire in 17 years. If you can earn 7.5%
on your funds, how much do you need to invest monthly until you
retire to reach your goal?...

If you want to retire on your 55th birthday as a millionaire,
how much will you need to invest monthly beginning on your 25th
birthday if the annual rate is 4%?

You are 35 years old, and have not saved any money yet. You hope
to retire at age 65, with a sustainable income of $150,000 per year
of current buying power. You assume that inflation will be 3.1% and
the fund you want to invest in will return 7.61% per year from now
until your death.
1) What is that amount in future actual dollars? $
2) how much do you need to save each year to reach your savings...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 28 minutes ago

asked 32 minutes ago

asked 45 minutes ago

asked 52 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago