EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 5.A, Problem 1P
Summary Introduction
To determine:
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I was having trouble with #2c I calculated . Please assist
After some calculations, you realize that your inflation -
adjusted retirement income shortfall is $44, 244 per
year. You anticipate that once you retire, you will be
retired for 36 years. How much at a minimum should
you have saved at the time of your retirement, if you
estimate that your 60/40 equity/debt retirement
portfolio will have a real (net of inflation) return of
5.29% on average? For simplicity, assume that once you
retire you will be withdrawing the necessary amount
from your portfolio at the end of each year.
Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to
meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of
5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living
cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much
should you set aside in order to meet this future increase in the cost of living for 25 years?
O $428,985.67
O S1,128,200.66
O $699,214.99
O $34,960.75
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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- 1. Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires-that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as GH¢ 40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that the real value of his retirement income will decline year by year after he retires.) His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has GH¢ 100,000 saved up; and he expects to earn a return on his savings of 8% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year,…arrow_forwardAssume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $50,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 6% per year from today forward. He currently has $150,000 saved and expects to earn a return on his savings of 8% per year with annual compounding. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question…arrow_forwardAssume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $50,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 4% per year from today forward. He currently has $75,000 saved and expects to earn a return on his savings of 10% per year with annual compounding. How much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to…arrow_forward
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