How much must he contribute each year until age 65

Assignment Help Financial Management

Reference no: EM131962905

John is saving for his retirement. Today is his 40th birthday. John first started saving when he was 25 years old. On his 25th birthday, John made the first contribution to his retirement account; he deposited $2,000 into an account that paid 9% interest, compounded monthly.

Each year on his birthday, John contributes another $2,000 to the account. The 15th (and last) contribution was made last year on his 39th birthday.

John wants to close the account today and move the money to a stock fund that is expected to earn an effective return of 12% a year. John's plan is to continue making contributions to this new account each year on his birthday.

His next contribution will come today (age 40) and his final planned contribution will be on his 65th birthday. If John wants to accumulate $3,000,000 in his account by age 65, how much must he contribute each year until age 65 (26 contributions in all) to achieve his goal?

Reference no: EM131962905

Questions Cloud

Explain the term just-in-time learning : Explain the term just-in-time learning (embedded learning). Why will it be increasingly prevalent in the future?

How much will the bank debit from couch account : How much will the bank debit from Couch's account (for the monthly service charges)? What collected balance is required to ensure that Couch's service charges.

Categories of employee development methods : What are the four broad categories of employee development methods?

Compute the incremental income after taxes : What will Johnson's incremental return on sales be if these new credit customers are accepted? (Input your answer as a percent rounded to 2 decimal places.)

How much must he contribute each year until age 65 : If John wants to accumulate $3,000,000 in his account by age 65, how much must he contribute each year until age 65 to achieve his goal ?

What is the cost of new equity using firm stock price : What is the cost of new equity assuming the firm's stock price is currently selling for $10 and will pay a dividend of $2 next year.

Determine which method would lead to the best decision : Determine which method would lead to the best decision when a competitor is submitting a lower bid for your product. Explain your answer.

Briefly explaining what degree you are pursuing : Briefly explaining what degree you are pursuing, why, and how you think taking this course will assist you in achieving your personal or professional goals.

Determine the after-tax cash flow from selling it : The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $303,000.

User Account

All Pages