Question

You are trying to decide how much to save for retirement. Assume you plan to save $ 5 comma 500 per year with the first investment made one year from now. You think you can earn 6.0​% per year on your investments and you plan to retire in 38 ​years, immediately after making your last $ 5 comma 500 investment. a. How much will you have in your retirement account on the day you​ retire? b.​ If, instead of investing $ 5 comma 500 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be? c. If you hope to live for 17 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 17th withdrawal​ (assume your savings will continue to earn 6.0​% in​ retirement)?

Answer 1

Instructions are listed below

Step-by-step explanation:

Giving the following information:

Assume you plan to save $ 5500 per year with the first investment made one year from now. You think you can earn 6.0​% per year on your investments and you plan to retire in 38 ​years, immediately after making your last $ 5500 investment.

A) We need to find the amount of money accumulated for retirement. We are going to use the following final value formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {5500*[(1.06^38)-1]}/0.06= $747,473.13

B) Now, we need to calculate the initial amount to invest for 38 years with no annual deposit.

PV= FV/(1+i)^n= 747,473.13/(1.06^38)= $81653.11

C) Annual retirement= 71342.42

Financial calculator:

Function= CMPD

n=17

i=6

PV= 747473.13

PMT= ? =SOLVE