Question

Suppose that you are 30 years old, and making retirement plans. You are starting to contribute $500 per month to your retirement account at the beginning of each month. You intend to do so until the age of sixty seven and then stop the contributions. You will retire at age 70 and want to know how much you'll have saved. You receive a 7% APR compounded monthly on your account.

a) How much will you have if you allow interest to accrue to age 70? (K means 1,000's)

b)Starting at age 70, what could you withdraw in terms of a monthly annuity until age 99 assuming you can get the same 7% APR on your money?

c) What could you withdraw in terms of a monthly perpetuity?

d) How about if you want an annual perpetuity, what could you withdraw at the end of each year?

e) If you wanted an annual perpetuity of $300000, how much per month should you have originally computed?

Answer 1