Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund. a) How much will Felix need to contribute at the end of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.?

Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund. a) How much will Felix need to contribute at the end of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter15: Mutual And Exchange Traded Funds

Section: Chapter Questions

Problem 2FPC

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Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund. a) How much will Felix need to contribute at the end of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.? Show formula, variables, calculation and a concluding statement in your response. b) How much will Felix need to contribute at the start of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.? Show formula, variables, calculation and a concluding statement in your response. c) Explain why there is a difference between the two amounts determined in parts a) and b) above.
Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund. b) How much will Felix need to contribute at the start of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.? Show formula, variables, calculation and a concluding statement in your response.
Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund. e) Felix is now 60 years old. He wants to set up a college fund for his grandchild Salah. He is aiming to be able to pass on $150 000 in 10 years’ time. How much does Felix need to set aside today into a college fund for Salah, assuming the fund earns 7.20% per annum?
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Doris plans to save $5000 per year for the next 35 years. Her money will be deposited in a stock market index fund that has a 0.5% annual management fee. If this fund earns 6% per year, how much will Doris save by investing in this fund instead of an actively managed mutual fund that has a 1% annual fee? Compute your answer as a future amount at the end of year . Assume that payments are made at the end of year. The future equivalent of savings amount at the end of year 35 is ___.
Stefani German, a 40-year-old woman, plans to retire at age 65, and she wants to accumulate $420,000 over the next 25 years to supplement the retirement programs provided by the federal government and her employer. She expects to earn an average annual return of about 6% by investing in a low-risk portfolio containing about 20% short-term securities, 30% common stock, and 50% bonds. Stefani currently has $32,620 that at an annual rate of return of 6% will grow to about $140,000 by her 65th birthday (the $140,000 figure is found using time value of money techniques, Chapter 4 Appendix.) Stefani consults a financial advisor to determine how much money she should save each year to meet her retirement savings objective. The advisor tells Stefani that if she saves about $18.23 each year, she will accumulate $1,000 by age 65. Saving 5 times that amount each year, $91.15, allows Stefani to accumulate roughly $5,000 by age 65. a. How much additional money does Stefani need to…
James is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to retire from full-time work at the age of 55 with $2 000 000 in savings. a) How much will James need to contribute at the end of each month in order to receive $2 000 000 in 30 years’ time at a compound interest rate of 7.25% p.a.? Show formula, variables, calculation and a concluding statement in your response.
Jeff is 25 years old and has decided to start a retirement program. Beginning in exactly one month he will contribute the amount of $1300 into a retirement account. 80% of the funds will be invested in a high-yield equity fund that is expected to earn 8% annually; 20% of the contribution will be invested in a lower- yield bond fund that is expected to return 5% annually. He will continue to make contributions for the next 40 consecutive years. When he retires, he will combine his money into an account with an annual return of 2%. Assuming he lives another 25 years, what is the maximum amount he will be able to withdrawal per month upon retirement? What if Jeff's assumptions are incorrect. Instead of his stock fund earning 8% annually, the fund only returns 7.5% for the investment period. Using this new assumption (but keeping all other assumptions the same), what is the maximum amount he will be able to withdrawal per month upon retirement? What other factors may affect the Jeff's…
Daniel Jackson is 30 years and wants to retire when he is 65. So far he has saved (1) $6,730 in an IRA account in which his money is earning 8.3 percent annually and (2) $5,590 in a money market account in which he is earning 5.25 percent annually. Daniel wants to have $1 million when he retires. Starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in which he expects to earn 9.83 percent annually. How much will Daniel have to invest every year to achieve his savings goal? (Round answer to 2 decimal places, e.g. 15.25.) Daniel will have to save $
Mr. Peter Phang, aged 35, is planning to retire at age 55. He understands from his advisor that he currently has a retirement funding shortfall of $800,000 at age 55 when he retires. His financial planner has recommended that he invest his savings in equities to help him meet the retirement funding shortfall. Assuming that the inflation-adjusted rate of return on equities is 5.5%, what is the regular savings which Peter will need to set aside yearly till his retirement?
Consider Donald and Joe who are both 30- years of age and recently graduated with a degree in Finance. Both Donald and Joe plan to retire at age 67, and the retirement plan pays a 12 percent per annum return and is also compounded monthly. Donald plans to invest $1,000 per month beginning next month into his retirement account, while Joe shall invest $2,000 per month. Joe however does not plan to begin investing until 10 years after Donald begins to invest. How much will each of the newly grads have at retirement? DO NOT USE EXCEL to show workings DO NOT USE EXCEL
James is currently 25 years old and earns $40,000 a year. His boss has promised that he will get a raise at 3% per year. James has recently won $100,000 off the lottery. He anticipates to retire at age 60. James will invest the $100,000 lottery win through an investment bank into a risk free fund (today). The yearly interest rate that James will receive is 4% (compounded yearly). James also plans to save 5% of his salary every year, and deposit it on a mutual fund every year. He is paid on a bi-weekly basis, but he will deposit his savings on the mutual fund at the end of the year. James expects to earn a return of 6% per year on this investment (compounded on a yearly basis). He will make the first deposit a year from today. His salary this year will be 3% more than $40,000 as the most recent yearly salary he has received is $40,000 per year. He will make his last deposit when he is 60 years old. How much money will James have in his savings when he retires at the age of 60?