Question

Use this information for the following two problems. You turned 25 years old today and have decided that it is time to make a retirement savings plan. You plan to deposit $3000 in your retirement account at the end of each year beginning 12 months from today and ending on your 65th birthday. Assume that you will earn 7.3% EAR on your savings. 33. How much will you have saved on your 65th birthday immediately after you make the last payment? Assume that you make the planned $3000 deposits and earn 7.3% EAR. A) $600,391 B) $647,219 C) $690,584 D) $697,466 34. You expect to live until age 95. How much can you withdraw every year in retirement (starting one year after your 65th birthday) so that you will have no savings left after your final withdrawal at age 95? Assume that you continue to earn 7.3%. A) $49,850 B) $53,738 C) $57,338 D) $58,753

Please use financial calculator

Answer 1

33)

Function Arguments ? x FV Rate 7.3% Nper 40 Pmt -3000 Pro Type o 1 1 1 1 1 = 0.073 = 40 = -3000 = 0 = 0 = 647219.1719 Returns the future value of an investment based on periodic, constant payments and a constant interest rate. Type is a value representing the timing of payment: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $ 647,219 Help on this function OK Cancel

Hence, correct option is B. $647,219

34)

Function Arguments ? X PMT 1 1 Rate 7.3% Nper Pv -647219 Evo Type o = 0.073 = 30 = -647219 = 53737.61516 Calculates the payment for a loan based on constant payments and a constant interest rate. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $53,738 Help on this function D OK Cancel

Hence, correct option is B. $53,738

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