Reference no: EM131997980

Michiko is one of the top cardiac surgeons in the world. After serving in the medical field for more than 30 years, she is now planning for retirement in 15 years’ time. Currently, Michiko has $1,500,000 in a savings account with Open Bank and some mutual fund investments worth $2,500,000 with Jubilee Assets Management. The savings account provides a 4% p.a. monthly compounded interest rate to Michiko, while the mutual fund investments are expected to offer a 10% annual return to her. She intends to increase her retirement savings by depositing $10,000 at the end of every month in her savings account for the next ten years and increase the amount up to $14,000 per month for the final five years until retirement. Michiko believes she will live for 25 years after she retires. Once she has retired, she will put all her wealth into another savings account with a 3% p.a. compounded monthly interest rate. When she dies, Michiko would like to donate a lump sum of $8,000,000 to Medecins Sans Frontières (Doctors Without Borders) to support its operations. Answer the following questions:

a) Assess the total wealth of Michiko when she retires in 15 years.

b) With $8,000,000 set aside for Médecins Sans Frontières upon her death, how much can Michiko withdraw each month during her retirement? 

c) Assume that Michiko would like to withdraw $60,000 each month after her retirement. In order to achieve this goal, she needs to transfer some of her savings into mutual fund investment at the very beginning. How much should Michiko transfer?