Bobby Whitaker wants to save money to meet three objectives. First, he would like to be able to retire after 30 years from now with retirement income of $15,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rapid City in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $1.2 million to his nephew Paulie. He can afford to save $2,150 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in Years 11 through 30? [Hint: Making a timeline is always a useful first step.]
Bobby Whitaker wants to save money to meet three objectives. First, he would like to be able to retire after 30 years from now with retirement income of $15,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rapid City in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $1.2 million to his nephew Paulie. He can afford to save $2,150 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in Years 11 through 30? [Hint: Making a timeline is always a useful first step.]
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 43P
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Bobby Whitaker wants to save money to meet three objectives. First, he would like to be able to
retire after 30 years from now with retirement income of $15,000 per month for 25 years, with the
first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in
Rapid City in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the
25 years of withdrawals, he would like to leave an inheritance of $1.2 million to his nephew Paulie.
He can afford to save $2,150 per month for the next 10 years. If he can earn an EAR of 10 percent
before he retires and an EAR of 7 percent after he retires, how much will he have to save each
month in Years 11 through 30?
retire after 30 years from now with retirement income of $15,000 per month for 25 years, with the
first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in
Rapid City in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the
25 years of withdrawals, he would like to leave an inheritance of $1.2 million to his nephew Paulie.
He can afford to save $2,150 per month for the next 10 years. If he can earn an EAR of 10 percent
before he retires and an EAR of 7 percent after he retires, how much will he have to save each
month in Years 11 through 30?
[Hint: Making a timeline is always a useful first step.]
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