Reference no: EM13232714
You estimate that, if you were to retire today, you would need a monthly income of $1600 in addition to the company pension, Canada Pension Plan, and Old Age Security payments you expect to receive. Today is your 22nd birthday and you plan to retire on your 65th birthday. You expect that the inflation rate will be 2.05 percent compounded annually for the foreseeable future.
a. Calculate the amount of the monthly (additional) income you will need at the time you retire. Round this amount up to the next multiple of $50 for all further calculations.
b. You plan to have a monthly income, paid in advance, that will grow by $10.50 per month during twenty-seven years of retirement. If your income starts at the amount you calculated in part (a), determine the amount you will need in an income fund when you retire if the fund will earn interest of 33?4 percent compounded monthly.
c. To accumulate the amount you found in part (b), you will make monthly deposits into a savings fund until your 40th birthday. Then, after your 55th birthday, you will make monthly deposits that will be three times as large as your original monthly deposits to the same fund until you retire. Determine the amount of the original monthly deposit you must make if your savings fund earns interest of 43?4 percent compounded monthly.
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