(Future value of a complex annuity) Springfield mogul Montgomery Burns, age 80, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns rebres, he wants to withdraw $0.9 billion at the beginning of each year for 8 years from a special offshore a pay 25 percent annually. In order to fund his retirement, Mr. Burns will make 20 equal end-of-the-year deposits in this same special account that will pay 25 percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to fur retirement account? a. If the retirement account will pay 25 percent annually, how much money will Mr. Burns need when he retres? $billion (Round to three decimal places.) b. How large of an annual deposit must he make to fund this retirement account? s million (Round to two decimal places)

(Future value of a complex annuity) Springfield mogul Montgomery Burns, age 80, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns rebres, he wants to withdraw $0.9 billion at the beginning of each year for 8 years from a special offshore a pay 25 percent annually. In order to fund his retirement, Mr. Burns will make 20 equal end-of-the-year deposits in this same special account that will pay 25 percent annually. How much money will Mr. Burns need at age 100, and how large of an annual deposit must he make to fur retirement account? a. If the retirement account will pay 25 percent annually, how much money will Mr. Burns need when he retres? $billion (Round to three decimal places.) b. How large of an annual deposit must he make to fund this retirement account? s million (Round to two decimal places)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 44P

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Funding a retirement goal. Austin Miller wishes to have 800,000 in a retirement fund 20 years from now. He can create the retirement fund by making a single lump-sum deposit today. a. If upon retirement in 20 years, Austin plans to invest 800,000 in a fund that earns 4 percent, what is the maximum annual withdrawal he can make over the following 15 years? b. How much would Austin need to have on deposit at retirement in order to withdraw 35,000 annually over the 15 years if the retirement fund earns 4 percent? c. To achieve his annual withdrawal goal of 35,000 calculated in part b, how much more than the amount calculated in part a must Austin deposit today in an investment earning 4 percent annual interest?
Suppose you just won the state lottery, and you have a choice between receiving $2,825,000 today or a 20-year annuity of $240,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.
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Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular retirement income by purchasing an immediate annuity. His desired retirement income is $24,000 per year. The regular pay out is paid immediately on purchase of the annuity. The projected rate of return of the annuity product is 2.5%. To purchase the annuity today, how much Mr Chew would require a lump sum of?