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17 Jun 2018

Mr. Funperson will graduate with an engineering BS degree from USF before his 25th birthday, and start his first professional job immediately upon his graduation. Mr. Funperson decides to set up a retirement account and makes his first monthly deposit into the retirement account a month after his 25th birthday. He will continue making these monthly deposits until he retires at the age of 65. Assume that his last monthly deposit will be made on his 65 birthday, and his goal is for his retirement account to reach half a million dollars on his 65 birthday. Further assume an interest rate of 6% per year.

(a) Calculate Mr. Funperson’s monthly deposit amount.

(b) Calculate Mr. Funperson’s monthly deposit if he delays by 10 years, That is, his first deposit will be made a month after his 35th birthday.

(c) Calculate Mr. Funperson’s monthly deposit if he stops making deposits after his 55th birthday. That is, his last deposit will be made on his 55th birthday.

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Trinidad Tremblay
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18 Jun 2018
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Related questions

This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $123,000 from her savings account on each birthday for 20 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 6.8 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.

a. If she starts making these deposits on her 36th birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), what amount must she 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 35th birthday to cover her retirement needs. What amount does she have to deposit?

c.

Suppose your friend’s employer will contribute $3,300 to the account every year as part of the company’s profit-sharing plan. In addition, your friend expects a $173,000 distribution from a family trust fund on her 55th birthday, which she will also put into the retirement account. What amount must she deposit annually now to be able to make the desired withdrawals at retirement?

This is a 3 part question:

1.)If you require a 9 percent return on your investments, which would you prefer?

a) $5,000 to day

b) $15,000 five years from now.

.

2.) Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years, so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61 st through 80 th birthday. The account is expected to earn 10 percent per annum for the entire period of his time. Determine the size of the annual deposit that must be made by Mr. Moore.

Hint: Do it in two steps. First find out now ( PV) how much is the total money required if he wants to withdraw $ 25,000 per year for a certain length of time. That will be the future value and now find out how much money he has to put in to realize that money. Be careful when it is an annuity use appropriate annuity tables.

3.) Find approximately the amount you would be willing to pay for a $ 1000 par value bond paying $80 interest each year and maturing in 12 years, assuming you would earn a 9 percent rate of return?

You calculate the price of the bond here

****Must Show All Work For Each Part

it's about Compound Interest Future Value

1-Raymond deposited his $1,000 bonus into an account paying 5.2% compounded semiannually. How much money will he have at the end of 7 years?

2-Stacy is going on a vacation to Europe at the end of 2 years. She deposits $6,141 in an account earning 4% interest compounded semiannually. How much money will Stacy have in he account for her trip?

3-Dan deposits $5,500 into a Certificate of Deposit (CD) paying 2.5% interest compounded quarterly. How much money will be in his account at the end of 17 years?

4-William deposited $7,000 into an account paying 7.7% compounded quarterly. Calculate how much money will be in the account at the end of 7 years.

5-Josh deposits $3,000 into an account paying 4% interest compounded monthly. What will the account be worth at the end of 23 years?

6-Jamie won $750 in a raffle at school. After donating $50 to charity, he deposited the remaining amount into an account paying 5% interest compounded quarterly. How much will the account be worth at the end of 15 years?

7-Mark deposited $5000 into an account paying 9% interest compounded monthly. How much money will he have at the end of 20 years?

8-Gary received a bonus of $8,000. He gave his son $720 and invested the remaining amount into a savings account earning 3% interest compounded quarterly. If he leaves the money in the account for 5 years, how much money will be in the account?

9-Curtis is 19 and wants to start saving money for retirement. He deposited $8,000 in an account earning 6% interest compounded semiannually. At the end of 50 years, how much will he have in the account for his retirement?

10-Franella wants to buy her dream car when she retires in 14 years. She deposits $20,000 in an account paying 8.4% interest compounded monthly. How much will she have to put towards her dream car at the end of 14 years?

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