Bundle: Contemporary Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781337587563
Author: MOYER, R. Charles; McGuigan, James R.; Rao, Ramesh P.
Publisher: Cengage Learning
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Question
Chapter 5.A, Problem 1P
Summary Introduction
To determine:
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After some calculations, you realize that your inflation -
adjusted retirement income shortfall is $44, 244 per
year. You anticipate that once you retire, you will be
retired for 36 years. How much at a minimum should
you have saved at the time of your retirement, if you
estimate that your 60/40 equity/debt retirement
portfolio will have a real (net of inflation) return of
5.29% on average? For simplicity, assume that once you
retire you will be withdrawing the necessary amount
from your portfolio at the end of each year.
Suppose that your retirement benefits during your first year of retirement are $60,000 per year which is just enough to
meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of
5% due to inflation. If there is no cost-of-living adjustment in your retirement pension, then some of your future living
cost has to come from savings other than retirement pension. If your saving account earns 7% interest a year, how much
should you set aside in order to meet this future increase in the cost of living for 25 years?
O $428,985.67
O S1,128,200.66
O $699,214.99
O $34,960.75
To live comfortably in retirement, you decide you will need to save $2 million by the time you
are 65 (you are 30 years old today). You will start a new retirement savings account today and
contribute the same amount of money on every birthday up to and including your 65th
birthday. Using TVM principles, how much must you set aside each year to make sure that you
hit your target goal if the interest rate is 5%? What flaws might exist in your calculations, and
what variables could lead to different outcomes? What actions could you take ensure you
reach your target goal?
Chapter 5 Solutions
Bundle: Contemporary Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
Ch. 5.A - Prob. 1PCh. 5.A - Prob. 2PCh. 5.A - Prob. 3PCh. 5.A - Prob. 4PCh. 5.A - Prob. 5PCh. 5.A - Prob. 6PCh. 5 - Prob. 1QTDCh. 5 - Prob. 2QTDCh. 5 - Prob. 3QTDCh. 5 - Prob. 4QTD
Ch. 5 - Prob. 5QTDCh. 5 - Prob. 6QTDCh. 5 - Prob. 7QTDCh. 5 - Prob. 8QTDCh. 5 - Prob. 9QTDCh. 5 - Prob. 10QTDCh. 5 - Prob. 11QTDCh. 5 - Prob. 12QTDCh. 5 - Prob. 13QTDCh. 5 - Prob. 14QTDCh. 5 - Prob. 15QTDCh. 5 - Prob. 16QTDCh. 5 - Prob. 17QTDCh. 5 - Prob. 18QTDCh. 5 - Prob. 19QTDCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45P
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