QUESTION 1 Charles Wong who is 35 years old wishes to retire at age 65. He will be able to save $10,000 per year starting now for the next 10 years. After that due to reduction in his expenses and increase in earnings, his savings will increase at 5% per year for the remaining 20 years. Currently he also owns a downtown condominium worth $800,000. Ignore taxes. 1. If his annual savings over the next 30 years are invested earning 6% per year and the value of the condominium appreciate at 4% per year, how much will he have on retirement? 2. He expects to live to age 95. If at age 65 he uses all his wealth (including proceeds from sale of the condominium) to purchase an annuity that pays 6% per year, how much can he withdraw at the end of each year (year 66 to 95 inclusive) and end up with a zero balance in the year of his expected death? 3. Assume all the conditions in part 2 except he would like to leave an estate of $2,000,000 when he dies. How much he can withdraw from the account at the end of each year (year 66 to 95 inclusive).
QUESTION 1 Charles Wong who is 35 years old wishes to retire at age 65. He will be able to save $10,000 per year starting now for the next 10 years. After that due to reduction in his expenses and increase in earnings, his savings will increase at 5% per year for the remaining 20 years. Currently he also owns a downtown condominium worth $800,000. Ignore taxes. 1. If his annual savings over the next 30 years are invested earning 6% per year and the value of the condominium appreciate at 4% per year, how much will he have on retirement? 2. He expects to live to age 95. If at age 65 he uses all his wealth (including proceeds from sale of the condominium) to purchase an annuity that pays 6% per year, how much can he withdraw at the end of each year (year 66 to 95 inclusive) and end up with a zero balance in the year of his expected death? 3. Assume all the conditions in part 2 except he would like to leave an estate of $2,000,000 when he dies. How much he can withdraw from the account at the end of each year (year 66 to 95 inclusive).
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter2: Using Financial Statements And Budgets
Section: Chapter Questions
Problem 7FPE: Funding a retirement goal. Austin Miller wishes to have 800,000 in a retirement fund 20 years from...
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