Starting to plan for retirement

Assignment Help Financial Management

Reference no: EM131016219

Susan is starting to plan for retirement. She has opened a bank account that pays 6% effective annual rate. She has two retirement goals that she would like to save for. Her first goal is to have enough money in her bank account to fund her retirement needs. She will retired exactly 20 years from today. She plans on being retired for 25 years and would like to spend $80,000 per year during retirement. She will withdraw her first retirement payment exactly on the day she retired (this is at t=20). Her second goal is to take everyone in her entire family on a cruise to Alaska during her retirement. She is planning on taking this cruise exactly 22 years from today. Currently the cruise, for all of members of her family, would cost $62,000. She expects the price of this cruise to increase at the rate of inflation, which is expected to be 2% per year. She will make monthly deposits into retirement account during her remaining 20 years of work. How much should she put in the bank each month, starting today, to meet her needs? (Hint: She will make deposits starting today (t=0) and continue for the next 20 years or 240 months?)

Reference no: EM131016219

Questions Cloud

What is cost of equity and yield to maturity : Rekall Inc., the memory implant company, has 7 million shares of common stock outstanding and 100,000 semi-annual bonds. Dividends are paid annually and are expected to grow in perpetuity at 3%. The bonds sell for 94% of face value and have a 10.42% ..

What is the hourly cost of this equipment : A contractor has purchased a piece of equipment for $150,000 and expects to use it 1,000 hrs per year for 10 years. The salvage value is $8,000 after 10 years. A single major repair of $20,000 is expected at the end of the 5th year. With an interest ..

Depreciation expense for first year straight-lined method : Using the given info, determine the depreciation expense for the first year straight-lined method.

Short-term cash in particular money market investment : The treasurer of a large corporation wants to invest $12 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.28 percent; that is, the EAR for this investment is 6.28 per..

Starting to plan for retirement : Susan is starting to plan for retirement. She has opened a bank account that pays 6% effective annual rate. She has two retirement goals that she would like to save for. Her first goal is to have enough money in her bank account to fund her retiremen..

How did these two strategies help apple unseat windows : The top two strategies that contributed to the success of Apple unseating Windows are Microsoft’s stumbles with Vista, and Windows 8.0 and Apple fostering the perception of high quality hardware and software. How did these two strategies help Apple u..

The firm uses bonds rather than a term loan : What effect do you think each of the following items should have on the interest rate that a firm must pay on a new issue of long-term debt? Indicate whether each factor would tend to raise, lower, or have an indeterminate effect on the interest rate..

Vertical analysis of a balance sheet : Complete the following vertical analysis of a balance sheet and round to nearest tenth percent.

Compute the price of a bond-semiannual interest payments : The Florida Investment Fund buys 86 bonds of the Gator Corporation through a broker. The bonds pay 6 percent annual interest. The yield to maturity (market rate of interest) is 8 percent. The bonds have a 20-year maturity. Using an assumption of semi..

User Account

All Pages