<p>Funding your retirement You plan to retire in exactly 20 years. Your goal is to<br />create a <a id="KonaLink0" class="kLink" href="http://www.justanswer.com/homework/41qt9-funding-retirement-plan-retire-exactly-20-years.html"><span style="color: green;"><span class="kLink">fund</span></span></a> that will allow you to receive $20,000 at the end of each year for<br />the 30 years between retirement and death (a psychic told you would die exactly<br />30 years after you retire). You know that you will be able to earn 11% per year<br />during the 30-year retirement period.<br />a. How large a fund will you need when you retire in 20 years to provide the<br />30-year, $20,000 retirement annuity?<br />b. How much will you need today as a single amount to provide the fund calculated<br />in part a if you earn only 9% per year during the 20 years preceding<br />retirement?<br />c. What effect would an increase in the rate you can earn both during and prior<br />to retirement have on the values found in parts a and b? Explain.<span><br /></span></p>
<p>Funding your retirement You plan to retire in exactly 20 years. Your goal is to<br />create a <a id="KonaLink0" class="kLink" href="http://www.justanswer.com/homework/41qt9-funding-retirement-plan-retire-exactly-20-years.html"><span style="color: green;"><span class="kLink">fund</span></span></a> that will allow you to receive $20,000 at the end of each year for<br />the 30 years between retirement and death (a psychic told you would die exactly<br />30 years after you retire). You know that you will be able to earn 11% per year<br />during the 30-year retirement period.<br />a. How large a fund will you need when you retire in 20 years to provide the<br />30-year, $20,000 retirement annuity?<br />b. How much will you need today as a single amount to provide the fund calculated<br />in part a if you earn only 9% per year during the 20 years preceding<br />retirement?<br />c. What effect would an increase in the rate you can earn both during and prior<br />to retirement have on the values found in parts a and b? Explain.<span><br /></span></p>
Related questions
| partial credit, P5-24 (similar to) |
Funding your retirementââPersonal Finance ProblemâââYou plan to retire in exactly 24years. Your goal is to create a fund that will allow you to receive â$20, 000at the end of each year for the 25years between retirement and deathâ (a psychic told you that you would die exactly 25years after youâ retire). You know that you will be able to earn 9â% per year during the 25â-year retirement period.
a.ââHow large a fund will you need when you retire in 24years to provide the 25â-year, â$20, 000
retirementâ annuity?
b.ââHow much will you need today as a single amount to provide the fund calculated in part a if you earn only 7â%
per year during the 24years precedingâ retirement?
c.ââWhat effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a and bâ?
Explain.
d.ââNow assume that you will earn 8â% from now through the end of your retirement. You want to make 24â, âend-of-year deposits into your retirement account that will fund the 25â-year stream of â$20, 000annual annuity payments. How large do your annual deposits have toâ be?
a. The amount of the fund you will need when you retire in 24years to provide the 25â-year, â$20,000 retirement annuity is
â$194132.24
b.ââThe amount you will need today as a single amount to provide the fund calculated in part a if you earn only 7â% per year during the 24years preceding retirement is â$38272.51
c.ââWhat effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a andbâ?
In the calculation of presentâ values, you should notice that the higher the interestâ rate, the lower the present value. â Therefore, in part a and b both values would be:lower, higher or equal
. In otherâ words, a smaller, higher, or equal. sum would be needed in 24 years for the annuity and a , higher or equal or smaller amount would have to be put away today to accumulate the needed future sum.
