You're grandfather has asked you to help him determine how much money he can take out of his retirement fund and NOT run out of money. If he currently has $500,000 and plans on needing the money for 25 years, how much can he take from the fund annually to meet his goals if he can earn 5%?

You're grandfather has asked you to help him determine how much money he can take out of his retirement fund and NOT run out of money. If he currently has $500,000 and plans on needing the money for 25 years, how much can he take from the fund annually to meet his goals if he can earn 5%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 39P

See similar textbooks

Related questions

Q: Your parents will retire in 18 years. They currently have $250,000, and they think they will need…

A: Given data; years to retirement = 18 current savings = $250,000 retirement fund= $1,000,000

Q: A civil engineer planning for her retirement places 11% of her salary each year into a…

A: First year retirement fund deposit (D1) = $180000 * 11% = $19800 Growth rate (g) = 2% n = 13 years r…

Q: How much does he need to put aside each birthday?

A: Retirement Planning is planning to ensure sufficient financial resources during the retirement…

Q: Carolyn is helping to save for her granddaughter’s college fund. It will probably take 18 years…

A: Future value required (FV) = $150,000 Interest rate (r) = 6% Number of annual payments (n) = 18…

Q: Miller is currently 35 years old and thinking about his pension fund and his income when he retired…

A: Present Value of Ordinary Annuity refers to a concept which determines the value of cash flows at…

Q: Evan would like to have $2,000,000 saved by the time he retires in 40 years. How much does he need…

A: Given details are : Future value of savings = $2000000 Time period = 40 years Interest rate = 110%…

Q: Your brother turned 30 today, and she is planning to save $8,000 per year for retirement, with the…

A: N = 30, PV =0, PMT = 8000, rate = 7% use FV function in Excel amount accumulated at retirement =…

Q: Your parents will retire in 29 years. They currently have $250,000 saved, and they think they will…

A: Future value is referred to as the value of the current assets at the date in future on the basis of…

Q: Your grandparents would like to establish a trust fund that would pay annual payments to you and…

A: In the given question we need to compute the present value of perpetuity because we will receive…

Q: I am setting up a fund for my son to go to college. I figure that he will need $50,000 by the time…

A: An annuity is the sum of equal payments made for a certain period, at a particular rate of return.…

Q: If you put $10,000 into an investment to fund your child's college education in 18 years, how much…

A: Initial investment = $10,000 Period = 18 years Interest rate = 0.1024 Accumulated amount = ?

Q: Your parents would like to establish a trust fund that would pay annual payments to you and your…

A: In this question we require to calculate the present value of perpetuity as we will receive $500000…

Q: . Holly wants to have $200,000 to send a recently born child to college. She sets up a 529 plan…

A: The question is based on the concept of time value of money with annuity payment , used the equation…

Q: Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8…

A: Present value = Future annual withdrawals amount * Present value of discounting factor (8%, 5th to…

Q: Your parents will retire in 19 years. They currently have $330,000 saved, and they think they will…

A: Interest rate is the rate of return to be earned from an investment for a particular period. Given:…

Q: Your parents will retire in 18 years. They currently have $250,000 saved, and they think they will…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: Under these assumptions, how much can he spend each year after he retires?

A: Future value: Future value is the amount derived from compounding the present amount or cashflows.…

Q: After graduating from school, Carl, 30 years old, wants to make a retirement plan for his future…

A: Retirement plan is the scheme in which a person pays in lump sum or instalment payment so as to get…

Q: Today Dante and Sharon had their first child. All of the grandparents gave them money to help out,…

A: Given:

Q: Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn…

A: Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

Q: You would like to have $200,000 in a college fund in 15 years. How much do you need today if you…

A: Present Value refers to the discounted value of a single cash flow or multiple cash flows today…

Q: What interest (to the closest percent) must she earn in this account to achieve this financial…

A: Interest refers to the cost of money borrowed from a lender. It can be simple or compound. It is…

Q: Willie would like to have $500,000 set aside at retirement. He would like to make annual deposits…

A: Time has been precious in all perspectives, however in terms of finance; the time has a monetary…

Q: After graduating from school, Carl, 30 years old, wants to make a retirement plan for his future…

A: As your question contains multiple sub-parts, we would be answering only first three. For the…

Q: Tom and Sandy have set up a sinking fund in order to have $18,000.00 in 4 years for their child's…

A: Using excel PMT function

Q: Your parents will retire in 19 years. They currentlyhave $350,000 saved, and they think they will…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Your parents will retire in 16 years. They currently have $400,000 saved, and they think they will…

Q: Richard wants to ensure that at least some of his descendants are well educated in perpetuity. He is…

A: The present value of a lump sum: The present value of a lump sum (single) investment made at a…

Q: Your parents will retire in 17 years. They currently have $310,000 saved, and they think they will…

A: Future value = present value * (1+r)^n Where r= rate of interest n= compounding year

Q: Your parents will retire in 29 years. They currently have $240,000 saved, and they think they will…

A: Number of years to retirement is 29. The amount saved is $240,000 The amount required in 29 years…

Q: calculate the amount of money she would have to invest in equal annual amounts to achieve her…

A: The future value of an investment is the expected value of money that will be received after a…

Q: Holly wants to have $200,000 to send a recently born child to college. She sets up a 529 plan and…

A: Using excel PMT function

Q: Justin is twenty years old and has saved 50,000. He can invest it in a real estate venture that will…

Q: Mr. Blochirt is creating a college investment fund for his daughter. He will put in $850 per year…

A: The future value of the annuity is the future worth of a cash flow series at a certain rate of…

Q: Asha feels she needs $45,000 per year in retirement. If she receives $30,000 a year from Social…

A: Data given: Annual requirement (atleast)= $45,000 Receipt from Social Security = $30,000 Investment…

Q: Ed wants to start saving for retirement by investing in his 401(k). Over the next 30 years, he wants…

A: Annuity means no. of finite payments which are same in size and made in equal intervals for the…

Q: Your parents will retire in 17 years. They currently have $290,000 saved, and they think they will…

A: Future value = Present value *(1+rate)^years $2,000,000 = $290,000*(1+rate)^17 Rate = ($2,000,000 /…

Q: What annual interest rate must they earn to reach their goal, assuming they don't save any…

A: Information Provided: Term = 29 years Present value = $250,000 Future value = $2,250,000

Q: Your grandparents would like to establish a trust fund that would pay annual payments to you and…

A: In this question we need to compute the amount parents need to deposit in a trust so that we will…

Q: You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: Your parents will retire in 23 years. They currently have $290,000 saved, and they think they will…

A: The present value is $290,000.The future value is $900,000.Number of years is 23.

Q: Suppose you want to use this fund to buy a $279,000 houseboat when you retire in 40 years. How much…

A: Future Value = $279,000 Interest Rate = 4.75% Time Period = 40 Years

Q: Your parents will retire in 30 years. They currently have $350,000 saved, and they think they will…

A: Given information: Present value amount (PV) is $350,000 Future value (FV) is $1,950,000 Number of…

Q: Bill has an emergency fund already set aside, so he can use his $400,000 of savings for retiremenr.…

A: 1) Savings = $ 400,000 Interest rate = 5% for 30 years Formula for annuity is Present value of an…

Q: Melanie is trying to save money for retirement and has a future goal of $600,000 at the end of 20…

A: Since, Present value = Future value/(1+period interest rate)n Where, N= Number of periods = 20…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Money Management and Achieving Financial Goals

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Your grandparents would like to establish a trust fund that would pay annual payments to you and your heirs of $250,000 a year forever. How much do your parents need to deposit into this trust fund today to achieve their goal if the fund can earn 10% interest?
Imagine your uncle is currently earning $200,000 pa and is about to retire. What percent of his current income will Social Security pay?
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?
You just received a $3,000 gift from your grandmother. You have decided to save this money so that you can gift it to your grandchildren 50 years from now. How much additional money will you have to gift to your grandchildren if you can earn an average of 8.5 percent instead of just 8 percent on your savings?
Your parents would like to establish a trust fund that would pay annual payments to you and your heirs of $500,000 a year forever. How much do your parents need to deposit into this trust fund today to achieve their goal if the fund can earn 7% interest?
Your friend is celebrating his 25th birthday today and wants to start saving for his retirement at age 65. He wants to be able to withdraw $100,000 from his savings account each birthday for 20 years following his retirement, and the first withdrawal will be on his 66th birthday. Your friend wants to invest his savings in the local bank, which offers 6 percent interest per year, and he wants to make equal annual payments on each birthday into his bank account. What amount should be deposited annually by your friend in order to withdraw $100,000 every year after retirement? Please show your work.
Ed wants to start saving for retirement by investing in his 401(k). Over the next 30 years, he wants to save up a total of $1,000,000. He will make contributions from his monthly paychecks (his annual salary is $144,000) and his employer will match 25% of his contributions. What percent of each monthly paycheck does he need to contribute to his 401(k) to meet his goal, if his account earn 8% interest? O 3.47% O 3.12% 4.86% O 4.47%
A rather wealthy man decides to arrange for his descendants to be well educated. He wants each child to have $65,000 for his or her education. He plans to set up a perpetual trust fund so that five children will receive this assistance in each generation. He estimates that generations will be spaced 25 years apart. He expects the trust to be able to obtain a 5% rate of return and the first recipients to receive the money 15 years hence. How much money should he now set aside in the trust?
A 40-year-old woman decides to put funds into a retirement plan. She can save $3,000 a year and earn 7 percent on this savings. How much will she have accumulated if she retires at age 65? Use Appendix C to answer the question. Round your answer to the nearest dollar.$ At retirement how much can she withdraw each year for 25 years from the accumulated savings if the savings continue to earn 7 percent? Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Appendix C
A 45-year-old woman decides to put funds into a retirement plan. She can save $2,000 a year and earn 6 percent on this savings. How much will she have accumulated if she retires at age 65? At retirement how much can she withdraw each year for 20 years from the accumulated savings if the savings continue to earn 6 percent?
Peter is 65 years old and has just attended his retirement party. He has amassed $1.50 million in retirement savings. He and his spouse have figured out that during retirement, they need to withdraw $100,000 at the end of each year from their retirement savings to maintain the standard of living that they would like to have. If they can earn 5% interest on the unspent balance in their retirement account, how many years will it be before their retirement savings are exhausted? O O 3 30 28 32 24 26 44 % 5 MacBook Pro (0 √ 2⁰ 00 * 8
Monica has decided that she wants to build enough retirement wealth, if invested at 8 percent per year, to provide her with $3,500 of monthly income for 20 years. To date, she has saved nothing, but she still has 30 years until she retires. How much money does she need to contribute per month to reach her goal? First compute how much money she will need at retirement, then compute the monthly contribution to reach that goal.