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Problem:

Suppose you wish to retire forty years from today. You determined that you need $50,000 per year once you retire, with the first retirement funds withdrawn one year from the day you retire. You estimate that you will earn 6% per year on your retirement funds and that you will need funds up to and including your 25th birthday after retirement (a total of 25 withdrawals).

Required:

Question 1: How much must you deposit in an account today (lump sum), so that you have enough funds for retirement?

Question 2: If you cannot afford to make a single deposit, today, to support your retirement. How much must you deposit each year in an account, starting one year from today (annuity), so that you have enough funds for retirement?

Question 3: How much must you deposit each year in an account, starting today, so that you have enough funds for retirement?

Question 4: After your 20th withdrawal, how much will be left in the account?

Please explain in detail and also provide step by step solution of each question.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91146136

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