Reference no: EM132764464
Question - This is a classic retirement problem. Your friend, Mary Jones, is celebrating her 30th birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals, which are as follows:
Years until retirement: 30
Amount to withdraw each year upon retirement: $90,000
Years to withdraw in retirement: 20
Interest rate: 5%
Mary is planning to make equal annual deposits into her retirement account, while her first withdrawal will take place one year after her last deposit.
For purposes of answering the following questions, feel free to use Excel or your calculator---but you must show your work and how you arrived at your answers.
Please answer the following five questions.
HINT: To answer these questions, first, you need to know how much Mary will need when she is ready to retire. Since this amount will be the same for each of the first four questions below.
1. If Mary starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals at retirement?
2. What if Mary starts making these deposits when she turns 40 years old and only has 20 years left to retirement, what amount must she deposit annually to be able to make the same desired withdrawals?
3. Suppose Mary (on her 30th birthday) has just inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump sum deposit today to cover the entire cost of her retirement, how much would she need to deposit today to cover the anticipated withdrawals?
4. Assume the same scenario as No. 3 above, but the interest rate she can earn over the next 30 years is only 3%; what would she need to deposit today to cover the anticipated withdrawals?
5. When you compare the results of No. 1 and No. 2 above, what is the key factor that causes the results to be so different?
|
Show how each of the amounts should be converted
: Show how each of the amounts mentioned above should be converted to an after-tax amount. The company's tax rate is 30 percent.
|
|
What is the correct entry for recording the June
: On January 1, $500,000 of 8%, 10-year bonds were sold for $530,000, What is the correct entry for recording the June 30 interest payment on the bonds
|
|
Compute how many bonds would need to issue to raise money
: Compute How many bonds would you need to issue to raise the money you require? Spear-It needs to raise $60 million and wants to issue 20-year zero-coupon bonds
|
|
Identify overall audit materiality
: Undertake the analyses below in relation to the Trial Balances for 2019 and 2020 and identify overall Audit Materiality
|
|
What amount must she deposit annually
: If Mary starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually
|
|
Explain to manager the concept involved
: Explain to Manager the concept involved and how that could be a "negative net decision"?Manager walks into your office for your weekly meeting
|
|
How much should this lump sum deposit be
: Alternatively, you decide to make one large lump sum deposit today instead of monthly deposits, how much should this lump sum deposit be
|
|
Discuss non controlling interests and goodwill
: From 2019 Loblaw Companies Annual Report, outline the consolidation descriptions, Discuss non controlling interests, goodwill.
|
|
Find the amount and the present value of an annuity
: Find the amount and the present value of an annuity of 1,500 every 3 months for 5 years if money is worth 8% compounded quarterly
|