This is a classic retirement problem. A time line will help in solving it. Your
ID: 2682673 • Letter: T
Question
This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 30th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $121,000 from her savings account on each birthday for 20 years following her retirement; the first withdrawal will be on her 66th birthday. Your friend intends to invest her money in the local credit union, which offers 6.6 percent interest per year. She wants to make equal annual payments on each birthday into the account established at the credit union for her retirement fund.If she starts making these deposits on her 31st birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), what amount must she deposit annually to be able to make the desired withdrawals at retirement? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
(2) Sum-of-the-years’ digits. Depreciation 2011 $ 4500 2012 $ --------------------------------------… (3) Double-declining balance. Depreciation 2011 $ 5182 2012 $ --------------------------------------… (4) One hundred fifty percent declining balance. Depreciation 2011 $ 3886 2012 $ Your answers are all correct. This shows that you do know how to calculate each of them. All you have to do now is calculate for the second year. Since you calculated for a partial year (3 months) for the first year, you have to make two calculations for the second year. Step 1. Calculate depreciation for the first nine months of the year. Step 2 Calculate what the new book value is. Step 3 Calculate depreciation for the last three months of the year. Step 4 Add step 1 and 3 to get the depreciation for 2012
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