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7 September, 13:03

You are trying to decide how much to save for retirement. Assume you plan to save $ 5 comma 500 per year with the first investment made one year from now. You think you can earn 6.0 % per year on your investments and you plan to retire in 38 years, immediately after making your last $ 5 comma 500 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $ 5 comma 500 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 17 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 17th withdrawal (assume your savings will continue to earn 6.0 % in retirement) ?

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  1. 7 September, 16:17
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    Instructions are listed below

    Explanation:

    Giving the following information:

    Assume you plan to save $ 5500 per year with the first investment made one year from now. You think you can earn 6.0 % per year on your investments and you plan to retire in 38 years, immediately after making your last $ 5500 investment.

    A) We need to find the amount of money accumulated for retirement. We are going to use the following final value formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = annual deposit

    FV = {5500*[ (1.06^38) - 1]}/0.06 = $747,473.13

    B) Now, we need to calculate the initial amount to invest for 38 years with no annual deposit.

    PV = FV / (1+i) ^n = 747,473.13 / (1.06^38) = $81653.11

    C) Annual retirement = 71342.42

    Financial calculator:

    Function = CMPD

    n=17

    i=6

    PV = 747473.13

    PMT=? = SOLVE
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