Problem #5 (20 pts) Anna is planning to save $2 million for retirement over the
ID: 1157857 • Letter: P
Question
Problem #5 (20 pts) Anna is planning to save $2 million for retirement over the next 35 years. a. If she is earning interest at a rate of 10% compounded quarterly, how mu deposit each quarter? compounded quarterly, how much money she should b. If she lives 25 years after retirement, what annual level of living expenses will those savings support? (assuming the same interest rate: 10% compounded quarterly) C. Suppose her retirement living expenses will increase by $6,000 each year due to inflation. Determine the annual spending plan in line with the inflation.Explanation / Answer
Ans a)
(1+(10%/4)^(35*4)*x=$2,000,000
x=2,000,000/(1.025)^140
She should invest $63050.544 each quarter
Ans b)
For 25 years we assume that annual expenditure for Anna is X
((2mn-X)(1.1)-X)(1.1)-X)(1.1).......X(1.1))=0
X=200305.8
She would be withdrawing $200305.8 every year till 25 years after her retirement
Ans c)
Now the expenditure is 206305.8 she would be spending for 22 years.
Annual Expense 200,305.80 1,799,694.20 1,979,663.62 1,779,357.82 1,957,293.60 1,756,987.80 1,932,686.58 1,732,380.78 1,905,618.86 1,705,313.06 1,875,844.37 1,675,538.57 1,843,092.42 1,642,786.62 1,807,065.29 1,606,759.49 1,767,435.43 1,567,129.63 1,723,842.60 1,523,536.80 1,675,890.48 1,475,584.68 1,623,143.14 1,422,837.34 1,565,121.08 1,364,815.28 1,501,296.81 1,300,991.01 1,431,090.11 1,230,784.31 1,353,862.74 1,153,556.94 1,268,912.63 1,068,606.83 1,175,467.52 975,161.72 1,072,677.89 872,372.09 959,609.30 759,303.50 835,233.85 634,928.05 698,420.85 498,115.05 547,926.56 347,620.76 382,382.83 182,077.03 200,284.73 (21.07) (23.17)Related Questions
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