Your great aunt Marie just hit the $100 million jackpot in the state lottery lump sum payment. She wants to share her good fortune with you by depositing $500,000 into an account that pays 5% interest. She has demanded that you leave the money in that account for 40 years until you are ready to retire. You expect to live for 25 years after you retire. Given the awesome jumpstart to your retirement account, you would like to be able to withdraw $350,000 per year at the end of each retirement year. To do this, you need to contribute to your retirement account at the end of every year until retirement. How much must you contribute to the account to reach your goal? Deposit approximately $11,696 per year. Deposit approximately $43,295 per year. Deposit approximately $39,156 per year. Deposit approximately $124,500 per year. took a

Your great aunt Marie just hit the $100 million jackpot in the state lottery lump sum payment. She wants to share her good fortune with you by depositing $500,000 into an account that pays 5% interest. She has demanded that you leave the money in that account for 40 years until you are ready to retire. You expect to live for 25 years after you retire. Given the awesome jumpstart to your retirement account, you would like to be able to withdraw $350,000 per year at the end of each retirement year. To do this, you need to contribute to your retirement account at the end of every year until retirement. How much must you contribute to the account to reach your goal? Deposit approximately $11,696 per year. Deposit approximately $43,295 per year. Deposit approximately $39,156 per year. Deposit approximately $124,500 per year. took a

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Suzy wants to retire in 30 years. She expects to live 25 years after retirement. She prepares a savings plan to meet the objectives: First, after retirement she would like to be able to withdraw $20,000 per month. The first withdrawal will occur at the end of the first month after retirement. Second, she would like to leave her daughter a $500,000 inheritance. Lastly, she wants to set up a fund that will pay $5000 per month forever to her favorite charity after she dies. These payments will begin one month after she dies. All the monies earn 10% annual rate compounded monthly. How much will she have to save per month to meet these objectives? She wishes to make her first deposit from now and the last deposit on the day she retires.
Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $10,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit$200,000 (rounded to the nearest whole dollar) so that you can fund the scholarship forever, assuming that the account will earn 6.00% per annum every year.
You and your sister are planning a large anniversary party 3 years from today for your parents' 50th wedding anniversary. You have estimated that you will need $6,500 for this party. You can earn 2.6 percent compounded annually on your savings. How much would you and your sister have to deposit today in one lump sum to pay for the entire party? Can the excel and calculator solution be provided?
Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 25 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of 2.8%. (a) She wants her first payout to have the same purchasing power as does $14000 today. How big should that payout be if she assumes inflation of 2.8% per year? (b) How much money must she deposit when she is 65 if her money earns 8.1% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 30 before starting her ordinary annuity?
Your rich uncle just celebrated his 35^(th) birthday and wants to provide SHSU an endowment of one million per year (forever) starting his 45^(th) birthday (10 years from today). He plans to set aside that money by putting it into a special account that pays 10% starting on his 36^(th) birthday through his 44^(th) birthday. How much must he set aside each year?
Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal interest rate on savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d 5 275, r 5 0.05 (annual rate), and n 5 60, and the savings formula with r replaced by r/12 (the…
Your uncle Mohammed is celebrating his 33th birthday today and wants to start saving for his retirement at the age of 63. He wants to be able to withdraw AED 100,000 from his saving account on each birthday for 20 years following his retirement. The first withdraw will be on his 64th birthday. Your uncle intends to invest his money in a local bank in Abu Dhabi that offers 7% interest rate per year. He wants to make equal payments on each birthday into the account established in the local bank for his retirement fund. If your uncle starts making these deposits on his 33th birthday and continues to make deposits until he is 63, what amount must he deposit annually to be able to make the desired withdrawals at retirement?
Molly Lincoln, a 25-year-old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,500 per year for her retirement fund and assumes that she'll retire at age 65. How much will Molly have accumulated when she turns 65 if she invests in equities and earns 8 percent on average? Round your answer to the nearest dollar. Molly is urging her friend, Isaac Stein, to start his plan right away, too, because he's 45. What would his nest egg amount to if he invested in the same manner as Molly and he, too, retires at age 65? Round your answer to the nearest dollar. 2a. Nest egg at 4% 2b. Nest egg at 8%
Mr. White is updating his estate plan for himself and his family. He would like to provide an income of $3000 every month starting 10 1/2 years from now and continuing for the next 20 years. He has started his account with an initial deposit of $10,000 and he knows his life insurance, maturing in 5 years, will have a cash value of $150,000. To make up the difference , Mr. White has decided to make monthly deposits in the account. How much should each deposit be if all interest is computed at 6% compounded monthly?
A couple just got married and they are both 25 years of age. They each plan to retire in 40 years at the age of 65. They want to be able to receive $200,000 at the end of each year for 20 years, upon retirement(so their first retirement payment will be at 41)Currently they have a total of $2,000 in cash savings. How much must they save at the end of each year for the next 40 years so as to have enough money to achieve their current goal? Assume the interest rate is 8% and will remain the same. Also assume that they start saving at the end of the first year.
Two people plan to invest $50,000. Matt is going to invest it in one lump sum and leave it in the account for 25 years to use for retirement. Sarah is going to invest $2000 per year for 25 years and will also use the money in the account for retirement. Is it reasonable to expect that Matt will have more money in his account than Sarah does in 25 years if both accounts earn the same interest?
Donald is updating his estate plan for himself and his family. He would like to provide an income of $3000 every month starting 10.5 years from now and continuing for the next 20 years. He has started his account with an initial deposit of $10,000 and he knows his life insurance, maturing in 5 years, will have a cash value of $150,000. To make up the difference, Donald has decided to make monthly deposits in the account. How much should each deposit be if all interest is computed at 6 percent compounded monthly?

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