Asa new professional employee you need to worry about your retirement many years

Question

Asa new professional employee you need to worry about your retirement many years in the future. Construct a table showing how much you need to have invested, at 4 percent, 8 percent, and 12 percent annual rate of return, to provide each $100 of monthly income. Assume that inflation will increase at 3 percent annually, so the num- bers you calculate will be in inflation-adjusted dollars. Calculate the monthly amount needed for a retirement period of 25, 30, 35, and 40 years. Assume that the investments are made in tax-sheltered accounts.and if a device lasts 20 years and has a payback of 10 years, what is the IRR?

Explanation / Answer

Particulars Amount Nominal Rates 4% 8% 12% Real Rates 0.97% 4.85% 8.74% Amount required to be invested to receive $100 monthly, i.e., $1200 annually 1200/Real rate 1200/Real rate 1200/Real rate Amount of investment          123,600          24,720          13,733 Years 4% 8% 12% 25 Years 28.81 16.41 9 30 Years 21.4 10.59 4.97 35 Years 16.29 6.96 2.78 40 Years 12.63 4.63 1.56

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