EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 5, Problem 32P
Summary Introduction
To determine: The amount Person X should save for his retirement at the end of each quarter.
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Part A:
By the end of this year, you will be 35-years old, and you want to plan for your retirement. You wish to retire at the age of 65, and you expect to live 20 years after retirement. Upon retirement you wish to have an annual sum of $50,000 to supplement your social security benefits. Therefore, you opened your retirement account with a 7% annual interest rate. At retirement you liquidate your account and use the funds to buy an investment grade bond which makes $50,000 annual coupon payments based on a 6 % coupon rate throughout your retirement years.
What is the face value, not the actual value, of the bond that you will be investing in?
Please calculate the monthly payment in your retirement account in order to be able to achieve the plan mentioned above.
How much will your inheritors receive?
1. Your financial planner has advised you to initiate a retirement account while you are still young. Today is your 35th birthday and you are planning to retire at age 65. Actuarial tables show that individuals in your age group have a life expectancy of about 75. If you want a $50,000 annuity beginning on your 66th birthday which will grow at a rate of 4 percent per year for 10 years: a. What amount must you deposit at the end of each year through age 65 at a rate of 8 percent compounded annually to fund your retirement account? b. How would your answer change if the rate is 9 percent? ¢. After you have paid your last installment on your 65th birthday, you learn that medical advances have shifted actuarial tables so that you are now expected to live to age 85. Determine the base-year annuity payment supportable under the 4 percent growth plan with a 9 percent interest rate.
Part A:
By the end of this year, you would be 35 years old and you want to plan for your retirement. You wish to retire at the age of 65 and you expect to live 20 years after retirement. Upon retirement, you wish to have an annual sum of $50,000 to supplement your social security benefits. Therefore, you opened now your retirement account with a 7% annual interest rate. At retirement, you liquidate your account and use the funds to buy an investment-grade bond which makes $50,000 annual coupon payments based on a 6 % coupon rate, throughout your retirement years.
How much will the face value of the bond that you will be investing? Please calculate the monthly payment in your retirement account in order to be able to achieve the plan mentioned above?
How much will your inheritors receive?
Chapter 5 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 5.A - Prob. 1PCh. 5.A - Prob. 2PCh. 5.A - Prob. 3PCh. 5.A - Prob. 4PCh. 5.A - Prob. 5PCh. 5.A - Prob. 6PCh. 5 - Prob. 1QTDCh. 5 - Prob. 2QTDCh. 5 - Prob. 3QTDCh. 5 - Prob. 4QTD
Ch. 5 - Prob. 5QTDCh. 5 - Prob. 6QTDCh. 5 - Prob. 7QTDCh. 5 - Prob. 8QTDCh. 5 - Prob. 9QTDCh. 5 - Prob. 10QTDCh. 5 - Prob. 11QTDCh. 5 - Prob. 12QTDCh. 5 - Prob. 13QTDCh. 5 - Prob. 14QTDCh. 5 - Prob. 15QTDCh. 5 - Prob. 16QTDCh. 5 - Prob. 17QTDCh. 5 - Prob. 18QTDCh. 5 - Prob. 19QTDCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45P
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