A person wants to withdraw $1000 every month, for 21 years, to supplement their pension check when they retire.a. How much money must be in an account that pays 7% interest compounded monthly, in order to meet their needs?b. How much money must be deposited into an account that pays 6.6% interest compounded monthly in order to achieve this amount? The monthly deposits will be made for 45 yearsC. How much money was actually deposited in to the account?d. How much money will actually be paid out from this account? Example:A person wants to withdraw $1000 every month, for 21 years, to supplement their pension check whenthey retire.a. How much money must be in an account that pays 7% interest compounded monthly, in orderto meet their needs?b.How much money must be deposited into an account that pays 6.6% interest compoundedmonthly in order to achieve this amount? The monthly deposits will be made for 45 yearsC. How much money was actually deposited in to the account?d. How much money will actually be paid out from this account?52OFE 7 8-967.08

An employer-provided pension to their employee under a retirement program, this program gives…

Answered: Example: A person wants to withdraw…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 24P

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Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264

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