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II. Retirement Planning A 52-year-old client asks an accountant how to plan for his future retirement at age 62. He expects income from Social Security in the amount of $21,600 per year and a retirement pension of $40,500 per year from his employer. He wants to make monthly contributions to an investment plan that pays 8% compounded monthly for 10 years so that he will have a total income of $83,700 per year for 30 years. What must the size of the monthly contributions be to accomplish this goal, if it is assumed that money will be worth 8% compounded continuously throughout the period after he is 62? To help you answer this question, complete the following. The monthly contribution R that would, after 10 years, amount to the present value S found in Question 2 can be obtained from the formula R = S [ i ( 1 + i ) n − 1 ] where i represents the monthly interest rate and n the number of months. Find the client’s monthly contribution, R .

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Mathematical Applications for the ...

11th Edition
Ronald J. Harshbarger + 1 other
Publisher: Cengage Learning
ISBN: 9781305108042

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Section
BuyFindarrow_forward

Mathematical Applications for the ...

11th Edition
Ronald J. Harshbarger + 1 other
Publisher: Cengage Learning
ISBN: 9781305108042
Chapter 13, Problem 3EAGP2
Textbook Problem
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II. Retirement Planning

A 52-year-old client asks an accountant how to plan for his future retirement at age 62. He expects income from Social Security in the amount of $21,600 per year and a retirement pension of $40,500 per year from his employer. He wants to make monthly contributions to an investment plan that pays 8% compounded monthly for 10 years so that he will have a total income of $83,700 per year for 30 years. What must the size of the monthly contributions be to accomplish this goal, if it is assumed that money will be worth 8% compounded continuously throughout the period after he is 62?

To help you answer this question, complete the following.

The monthly contribution R that would, after 10 years, amount to the present value S found in Question 2 can be obtained from the formula

R = S [ i ( 1 + i ) n 1 ]

where i represents the monthly interest rate and n the number of months. Find the client’s monthly contribution, R. 

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