Reference no: EM132711766

Elissa Rump, aged 22, has decided to assert her independence and not join the Rump family businesses. Instead she is about to begin her career as a scientist for a government research organisation. Having taken a course in finance as part of her university studies, Elissa knows she should begin saving for retirement immediately.

• Elissa's retirement plan allows her to make equal yearly contributions, and it pays 9% interest annually. Upon her retirement at age 65, Elissa plans to buy a new boat, which she estimates will cost her $300 000. She also estimates that in order to live comfortably she will require a yearly income of $80 000 for each year after she retires. Based on her family history, Elissa expects to live until age 80.

• When she retires, Elissa will purchase her boat in one lump sum and place the remaining balance into an account that pays 6% annual interest, from which she will withdraw her $80 000 per year, at the end of each year.

Required:

Problem 1: If Elissa's first contribution is made one year from today and her last is made the day she retires, how much money must she contribute each year to her retirement fund?