Question

Thomas Monroe is going to take out a withdrawal of $80,000 per year at t =...

Thomas Monroe is going to take out a withdrawal of $80,000 per year at t = 0 through t=5. Then he is going to make 50 annual unequal withdrawals from his savings with the first withdrawal occurring at t=6 and the last withdrawal occurring at t=55. He wants each withdrawal to have the same purchasing power as $150,000 has today so the withdrawals need to grow at a constant rate of 3% to compensate for expected inflation per year. His account earns 10% per year. How much needs to be in his account today for him to be able to withdraw $80,000 per year at t=0 through t=5 and make 50 additional withdrawals (from t=6 through t=55)?

     0               1                2               3               4               5               6               54                55

     |                 |                 |                |                 |                |                |                 |                   |

   -80K        -80K          -80K         -80K         -80K         -80K          W1            W49              W50

            a.   $1,912,673

            b.   $1,781,925

            c.   $1,629,682

            d.   $1,821,701

            e.   None of the above is within $100 of the correct answer.

The answer is A, please help show work

Thank you

Homework Answers

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
Gabriel Lombardo just retired today. He is going to take out a withdrawal of $150,000 today...
Gabriel Lombardo just retired today. He is going to take out a withdrawal of $150,000 today to fund his quest for extreme sports for 3 years. Then he will make 30 annual unequal withdrawals from his savings with the first withdrawal occurring at t=2. He wants each withdrawal to have the same purchasing power as $70,000 has today so the withdrawals need to grow at a constant rate of 3% to compensate for expected inflation per year. His savings account...
John is planning to take a trip around the world twenty years from today. In order...
John is planning to take a trip around the world twenty years from today. In order to pay for this trip he plans to make equal yearly deposits in years 1-through-11 into an account paying 9% interest compounded annually. He plans to make five $50,000 yearly withdrawals from the account with the first withdrawal occurring twenty years from today. How much must he save each year to provide himself with the necessary spending money for this dream vacation?
To complete your last year in business school and then go through law school, you will...
To complete your last year in business school and then go through law school, you will need $30,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $30,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 3.73% interest a sum of money that is sufficient to provide the 4 payments of $30,000 each. His deposit will be made today. How...
To complete your last year in business school and then go through law school, you will...
To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 6.54% interest a sum of money that is sufficient to provide the 4 payments of $20,000 each. His deposit will be made today. How...
Required Lump-Sum Payment To complete your last year in business school and then go through law...
Required Lump-Sum Payment To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 4.61% interest a sum of money that is sufficient to provide the 4 payments of $20,000 each. His deposit will be...
John was a high school teacher earning $ 80,000 per year. He quit his job to...
John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. In order to learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills. John’s course was for 3 months. John had to pay $2,000 as tuition for the 3 months. After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for...
7. Mas Karyo borrows $28,000 with compound interest of 12% per year. Installments are made by...
7. Mas Karyo borrows $28,000 with compound interest of 12% per year. Installments are made by amount every year for 4 years, at the end of each year. How big is it? installments every year? How much interest is paid in year 2? 8. Perhatikan tabel cashflow dibawah ini. Hitunglah nilai C yang menyebabkan nilai tabungan ekivalen dengan nilai penarikan uang, jika bunga majemuk yang diberikan adalah sebesar 6% per tahun. Year       Withdrawal Amount 0           -$1.500 1          ...
Required Lump-Sum Payment To complete your last year in business school and then go through law...
Required Lump-Sum Payment To complete your last year in business school and then go through law school, you will need $30,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $30,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 3.51% interest a sum of money that is sufficient to provide the 4 payments of $30,000 each. His deposit will be...
Kim has $24 per week in her entertainment budget. She splits her time between going to...
Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. Her total utility from 1 movie is 48 utils; her total utility from 2 movies is 75 utils; and her total utility from 3 movies is 105 utils. Her total utility from 4 yoga class is 76 utils; her total utility from 5 yoga classes is 97 utils; and...
1. You need a 20-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage...
1. You need a 20-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 8.1 percent APR for this 240-month loan. However, you can afford monthly payments of only $900, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. Required: How large will this balloon payment have to be for you to keep your monthly...