You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100,000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a. How much should you save in an interest-bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100,000 every year for 30 years after retirement? Assume that the interest in the interest-bearing account is compounded monthly.
You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100,000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a. How much should you save in an interest-bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100,000 every year for 30 years after retirement? Assume that the interest in the interest-bearing account is compounded monthly.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 3PA: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...
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Transcribed Image Text:You have 20 years left for your retirement. You wish to accumulate a
sum large enough by that time which will allow you an annual withdrawal
of $100,000 every year for 30 years. The average interest rate between
now and the 20th year is likely to be 4% p.a. From then onwards, for
the next 30 years, it is likely to be 6% p.a.
How much should you save in an interest-bearing account at the end of
each month to be able to have enough money at the time of retirement
which will allow you your desired withdrawal of $100,000 every year
for 30 years after retirement? Assume that the interest in the
interest-bearing account is compounded monthly.
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