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Jane Stevens is 30 years old, and she is reviewing her retirement plans.  She at present has $20,000 in a retirement account.  Jane plans to spend another $5,000 in account today (Year 0), and then raise this amount by 4% per year over the next 40 years (Years 1 throughout 40).  But, she has a 3-year old son, who will attend college in 15 years.  Jane will hang up her contributions for four years while her son is in college, that is, she will not make any contributions in Years 15, 16, 17, and 18.  Her contribution in Year 19 will be 4% higher than the one in Year 14.

(a) How much will Jane have in her retirement account at once after she makes her last contribution in Year 40, assuming a return on her investments of 9%?

(b) Jane desires to withdraw a stable amount each year from her account over a 20-year period.  Her first withdrawal will occur at age 71 (Year 41), and the last at age 90.  How much will Jane be capable to withdraw each year, supposing a return on her investments of 5% during her retirement years?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91661

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