Plans to retirement, Assume that your father is now 50

Plans to retirement

Assignment Help Financial Management

Reference no: EM13890077

Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $35,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then get 24 additional annual payments. Inflation is expected to be 3% per year from today forward. He currently has $75,000 saved up; and he expects to earn a return on his savings of 7% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.)

Reference no: EM13890077

Questions Cloud

Customer quality for purposes of granting trade credit : Which of the following would NOT typically be used for assessing customer quality for purposes of granting trade credit?

Compute the risk premium for the stock of omega tools : Compute the risk premium for the stock of Omega Tools if the risk free rate is 6%, the expected market return is 12%, and Omega's stock has a beta of .8.

What is the accumulated sum of stream of payments : What is the accumulated sum of the following stream of payments 2849 every year at the end of the year for 11 years at 9.04 percent compounded annually?

Assume that you just won the state lottery : Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at the end of each of the next 25 years (i.e., $1 million over 25 years) or as a lump sum of $500,000 paid immediately. If you expect to be able to earn..

Plans to retirement : Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement payment to have the same purchasing power at the time..

How sensitive is the npv to changes in the quantity sold : Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was found..

Ceases to withdraw funds from the account : Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, beginning at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the ac..

How much more is nancys cash flow worth : Mary is going to receive a 30-year annuity of $10,500. Nancy is going to receive perpetuity of $10,500. If the appropriate interest rate is 7 percent, how much more is Nancy’s cash flow worth?

What will the beta of the equity in the firm : Safe Corp which owns and operates grocery stores across the US, currently has $ 50 million in debt and $ 100 million in Equity outstanding. Its stock has a beta of 1.2. Its stock has a beta of 1.2. Debt-Equity ratio to 8. Debt-Equity ratio to 8. What..

User Account

All Pages