Sunday, December 4, 2011

Math Question (Interest Rates)?

Kevin turned 45 today. He has an investment account worth $20,000, which is earning 8.5% APR compounded semi-annually. Kevin lives a single life and would like to retire when he turns 60 years old. At the end of this month Kevin will deposit $200 into his investment account. This monthly contribution is expected to continue and grow each month at a rate of 1.0% each year until retirement. When Kevin retires he will no longer contribute and will begin withdrawing $1,000 per week from his investment account until his death.





a) Calculate the effective periodic rates (EPR) required in this problem.





b) How much money will Kevin have at the time of his retirement? (Assume all payments were deposited/withdrawn at the end of each period.)





c) Since we know Kevin's retirement cash flow expectations, how many years will the money last him until he depletes his retirement fund?





d) Draw a detailed timeline and label all components. Use the information from part a, b and c.





e) Assume Kevin did not inform you of the pre-retirement contribution amounts. He expects to die when he is 85 years old. If he still withdraws the same amount of money after retirement, how much fixed monthly amount will he need to contribute during his pre-retirement years?


|||Sorry dude, but I don't do homework for people.





If your textbook isn't helping you out, try this site:





http://www.experiglot.com/2006/06/07/how鈥?/a>

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