You are planning your retirement in 10 years. You currently have $171,000 in a b

Question

You are planning your retirement in 10 years. You currently have $171,000 in a bond account and $611,000 in a stock account. You plan to add $6,900 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11.25 percent and the bond account will earn a return of 7.75 percent. When you retire, you plan to withdraw an equal amount for each of the next 24 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 7 percent.

How much can you withdraw each year in your retirement? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Amount in stock account =$ 611000 period =10 years rate =11.25

so the future value of the stock account = 611000*(FVIF 11.25.10)= 611000*2.9040=$ 1,774,344

Amount in bond account = Initial amount =$ 171000 rate 7.75 period = 10 years ,annual additions =$ 6900

so the future value of the bond account =when we calculate on intrest calculator we get =459,497.28

  total saving = 171000+ 69000(6900*10) =$ 240000

Total savings i.e in the stock account + bond account = $ 1774,344+459,497.28 =$ 2,233,841.28

period of investment =24 years rate of interest =7%

FV= 2,233,841.28(FVIf 7%,24)= 2,233,841.28*5.0724= 1,133,096.50

24 yearly equal withdrawals = 1,133, 096.50/24= $ 472,122.35

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