What is the maximum constant amount

Assignment Help Financial Management

Reference no: EM13806139

In order to save for his retirement, Dale Falcinelli makes the first of 8 equal annual deposits into an investment on June 6, 2014.He believes the investment will always earn 10% a year. The last deposit will be made on June 6, 2021. The deposits must be of sufficient size to enable Mr. Falcinelli to make 30 equal annual withdrawals of $80,000 starting on June 6, 2026.

Assume that he makes the 8 deposits as planned and makes the first two $80,000 withdrawals in 2026 and 2027. On the evening of June 6, 2027, Mr. Falcinelli makes a horrifying discovery: the investment has been yielding only 5% since June 6, 2017. Fully expecting to still live another 28 years, he knows he must drastically cut back on his lavish life style.

What's the maximum constant amount he can withdraw for each of the remaining 28 years, starting June 6, 2028 if the interest rate continues to stay at 5%?

Reference no: EM13806139

Questions Cloud

What is the return from the investment : A parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. What is the monthly payment? One bedroom rented out to a roomTe for $400 a month. After 4 years, the parent Ella..

Calculate mean-variance and sharpe ratio of cash flows : Calculate mean, variance, and Sharpe ratio of the following cash flows. a 25% probability of making $1000, a 20% probability of making $200, a 10% probability of making $100, and a 45% probability of making nothing

Compute the APR and EAR of both loans : Plan B requires quarterly payments of $11,000 for the first year, $7,000 for the second and third year, and $3,000 for the fourth year. Compute the APR and EAR of both loans. Which loan should you take and why?

Find the garbled number : On the evening’s financial news broadcast, the reporter states Last prices fell by 0.5%. This is an annual rate of deflation of #%&@* percent. Find the garbled number.

What is the maximum constant amount : In order to save for his retirement, Dale Falcinelli makes the first of 8 equal annual deposits into an investment on June 6, 2014.He believes the investment will always earn 10% a year. The last deposit will be made on June 6, 2021. What's the maxim..

Find the value today of a perpetual annuity : Find the value today of a perpetual annuity that pays $1.75 per quarter starting on the last day of quarter 15 (the end of the third quarter of the 4th year) assuming an interest rate of 6% a year, compounded quarterly.

Contemplating replacing some existing equipment : Ace Software, Inc. is contemplating replacing some existing equipment with some new hardware. The existing equipment, carried on the books at $800, is being depreciated using the straight-line method to a salvage value of $80 over its remaining life ..

About the retirement account : An individual has $110,000 in a retirement account. At the beginning of each year she withdraws $10,000 while earning 10% a year on her money. How much money will be in the account in 20 years? How much will she have in the account after 40 years?

Measures of forecast accuracy like mae, mse and mape : Use the Forecasting Method that uses the average of all the data available until that period as the forecast for the next period. What is the forecast for month 11?

User Account

All Pages