Bilbo Baggins wants to save money to meet three objectives. First, he would like
ID: 2640284 • Letter: B
Question
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $28,500 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $365,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $1,225,000 to his nephew Frodo. He can afford to save $3,000 per month for the next 10 years. If he can earn a EAR of 11 percent before he retires and a EAR of 8 percent EAR after he retires, how much will he have to save each month in years 11 through 30? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $28,500 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $365,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $1,225,000 to his nephew Frodo. He can afford to save $3,000 per month for the next 10 years. If he can earn a EAR of 11 percent before he retires and a EAR of 8 percent EAR after he retires, how much will he have to save each month in years 11 through 30? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
if he saves 3000 per month for next ten years his savings will be $36,000X 17.549= $631,764,000 (approximately)
his total needed amount is = $28500X12X20=$6,840,000
cabin of Rivendell= $$365,000
after 20 years withdrews the remained amount should be= $1,225,000
total= $8,430,000
his total receivables are much higher than needed ones, so he can fulfill all his obligations with the savings only
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