Scribd
Upload
139 views3 pages

Question: Assume That Your Father Is Now 50 Years Old, Plan To Retired in 10 Years, and Expects To Live For..

The document discusses a scenario where a father is currently 50 years old and plans to retire in 10 years. He wants his first retirement payment to have the same purchasing power as $40,000 does today. He wants all subsequent payments to be equal to the first payment. Given an expected inflation rate of 5% and expected return on savings of 8%, how much must he save each year for the next 10 years to meet his goal?

Uploaded by

Malik Asad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
139 views3 pages

Question: Assume That Your Father Is Now 50 Years Old, Plan To Retired in 10 Years, and Expects To Live For..

The document discusses a scenario where a father is currently 50 years old and plans to retire in 10 years. He wants his first retirement payment to have the same purchasing power as $40,000 does today. He wants all subsequent payments to be equal to the first payment. Given an expected inflation rate of 5% and expected return on savings of 8%, how much must he save each year for the next 10 years to meet his goal?

Uploaded by

Malik Asad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Alert when this question is answered

× Download the Chegg Study App GE T


★★★★★ (80K+)

  Textbook Solutions Expert Q&A Practice 

home / study / business / nance / nance questions and answers / assume that your father is now 50...
Find solutions for your homework

Question: Assume that your father is now 50 years old, plan to


retired in 10 years, and expects to live for...

Assume that your father is now 50 years old, plan to retired in 10 years, and expects to live for 25 years
after he retires that is, until age 85. He wants his rst retirement payment to have the same purchasing
power at the time he retires as $40,000 has today. He wants all his consequent retirement payment to be
equal to his rst retirement payment. (Do not let the retirement payments grow with in ation: Your father
realizes if in ation occurs 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 receive 24
additional annual payments. In ation is expected to be 5% per year from today forward. He currently has
$100,000 saved and expects to earn a return on his savings of 8% per year with annual compounding. To
the nearest dollar, how much must he save during each of the next 10 years to meet his retirement goal?

I known the answer is PMT= $36,949.61, but im not sure how they got that answer. Can someone show me
in excel???

Expert Answer

Anonymous
answered this

Step 1: calculate the present value of all the retirement payments at the time of retirement.

Step 2: The amount calculate in step 1 is the FV required in the savings account.

Step 3: Given that the current balance in the savings account is $100,000 and the time to retirement is 10
years, calculate the annual savings required to achieve the FV calculated above.
2 Comments

Was this answer helpful? 8

0
Practice with similar questions

Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years
after he retires - that is, until age 85. He wants his rst retirement payment to have the same purchasing
power at the time he retires as $60,000 has today. He wants all his subsequent retirement payments to
be equal to his rst retirement payment. (Do not let the retirement...
See answer

Required Annuity Payments Assume that your father is now 50 years old, plans to retire in 10 years, and
expects to live for 25 years after he retires - that is, until age 85. He wants his rst retirement payment to
have the same purchasing power at the time he retires as $50,000 has today. He wants all his
subsequent retirement payments to be equal to his rst retirement payment...
See answer

Show more 

Questions viewed by other students

You want to accumulate $1 million by your retirement date, which is 25 years from now. You will make
25 deposits in your bank, with the rst occurring today. The bank pays 8% interest, compounded
annually. you expect to get annual raises of 3%, which will offset in ation, and you will let the amount
you deposit each year also grow by 3% (i.e., your second deposit will be...
See answer 100% (2 ratings)

Assume that your brother 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 (i.e. until he is 85 years old). He wants a xed retirement income that has
the same purchasing power at the time he retires as $50,000 has today (he realizes that the real value
of his retirement income will decline year by year after he...
See answer

Show more 
COMPANY

LEGAL & POLICIES

CHEGG PRODUCTS AND SERVICES

CHEGG NETWORK

CUSTOMER SERVICE

© 2003-2021 Chegg Inc. All rights reserved.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy