Calculate how much professor laneway needs to invest

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Retirement Planning

Professor Sandra Laneway received a payment of $500,000 from her grandmother's estate on what is coincidentally her 63rd birthday. Sandra invested the entire inheritance amount today at an interest rate of 8% per annum (compounded monthly) due to mature on her 70th birthday when she plans to retire.

Upon retirement Sandra plans to commute her investments to a monthly pension which she plans to receive until her 90th birthday. During this 20 years of post-retirement Sandra estimates that she will require an annual pension income of $84,000 ($7,000 per month) in order to live in the manner to which she is accustomed. She expects to receive her first monthly pension payment 1 month after her 70th birthday. In addition, Sandra would like to have a remaining balance of $200,000 in her account at the conclusion of her 20-year pension.

Sandra understands that the $500,000 inheritance she has invested will not achieve all of these things and wants to invest an additional monthly amount from her pre-retirement income as a Professor at Sydney University during the next 7 years leading to her planned retirement.
Calculate how much Professor Laneway needs to invest (starting in one month's time) in order to achieve her investment goals.

This is a multi-part question that requires careful planning and the development of timelines is recommended (show all workings).

Reference no: EM133424622

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