This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 34th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $90,000 from her savings account on each birthday for 15 years following her retirement; the first withdrawal will be on her 66th birthday. Your friend intends to invest her money in the local credit union, which offers 12 percent interest per year. She wants to make equal annual payments on each birthday into the account established at the credit union for her retirement fund. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
a. If she starts making these deposits on her 35th birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), she must deposit $ annually to be able to make the desired withdrawals at retirement.
b. Suppose your friend has just inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump sum payment on her 34th birthday to cover her retirement needs. This deposit will have to be in the amount of $ .|||a. If she starts making these deposits on her 35th birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), she must deposit $ annually to be able to make the desired withdrawals at retirement.
The present value of 15 $90,000 withdrawals discounted back 15 years at 12% is $612,977.80.
The thirty-one payments needed to reach this amount will be $2,017.38
b. Suppose your friend has just inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump sum payment on her 34th birthday to cover her retirement needs. This deposit will have to be in the amount of $ .
The lump sum payment needed is the present value of $612,977.80 discounted back 32 years at 12%.
$16,310.53
Formulas and explanations at the source below.|||12% interest per year in a local credit union!?!?!
Your book sounds like it was written in 1979.
I think you can do your own homework. You won't learn if people just tell you the answer.
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