Question

Please use excel to construct a spreadsheet

How valuable is it if a fund saves you 50 basis points (i.e. 0.5%) per year in expenses? The following gives a sense:
a) If you save $40,000/year and invest at a 4.0% rate of return, how long does it take to save $2 million?
b) If you save at $40,000/year and invest at 4.5%, how long will it take?
c) If you have $2 million and can invest at 4%, how many dollars can you spend per year and have nothing left after 30 years?
d) How much can you spend per year if you can invest at 4.5%?

Answer 1

a	Annual savings	40000
	Rate	0.04
	Value required	2000000
	Years required	28.01

b	Annual savings	40000
	Rate	0.045
	Value required	2000000
	Years required	26.78

c	Present amount	2000000
	Rate	4%
	Period	30
	Annual spending	($115,660.20)
d	Present amount	2000000
	Rate	5%
	Period	30
	Annual spending	($122,783.09)

WORKINGS