After graduating from college with a bachelor of business administration, you be

Question

After graduating from college with a bachelor of business administration, you begin an ambitious plan to retire in 23.00 years. To build up your retirement fund, you will make quarterly payments into a mutual fund that on average will pay 10.64% APR compounded quarterly. To get you started, a relative gives you a graduation gift of $2,966.00. Once retired, you plan on moving your investment to a money market fund that will pay 4.32% APR with monthly compounding. As a young retiree, you believe you will live for 31.00 more years and will make monthly withdrawals of $10,682.00. (YOUR WITHDRAWALS ARE AT THE BEGINNING OF THE MONTH!!!) To meet your retirement needs, what quarterly payment should you make? Answer Format: Currency: Round to: 2 decimal places. Enter Answer Here... Submit Answer

Explanation / Answer

Present value of withdrawals at the end of 23 years

=PV(4.32%/12,12*31,10682,0,1)=$2,195,649.95

Quarterly payments needed=PMT(10.64%/4,4*23,2966,-2195649.95)=$5,643.65

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