You are planning to save for retirement over the next 35 years. To do this, you

Question

You are planning to save for retirement over the next 35 years. To do this, you will invest $770 per month in a stock account and $370 per month in a bond account. The return of the stock account is expected to be 9.7 percent, and the bond account will earn 5.7 percent. When you retire, you will combine your money into an account with an annual return of 6.7 percent. Assume the returns are expressed as APRs.

How much can you withdraw each month from your account assuming a 30-year withdrawal period? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Withdraw $ per month

Explanation / Answer

Assuming the rates are annual rates compounded monthly
amount of stock account = 770(1.0080833..^420 - 1)/.00808333.. = 2706320.70
amount from bonds = 370(1.00475^420 - 1)/.00475 = 492104.61

total available = 3198425.31

This will become the Present Value of the annuity
let the annuity payment be x

3198425.31 = x(1 - 1.00558333..^-360)/.00558333
x = 20638.73

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