Homework Answers
Part-a:
Total target replacement income = 75% of preretirement income
= 60,00,000*75%
= $45,00,000
.
Part-b:
Current age = 40 years
Retirement age = 65 years
No of years left for retirement = 65-40 = 15 years
Real Interest Rate = 3%
Let the annual saving to reach her goal be $x
Future Value = Annual Saving * FVIFA(3%,15)
45,00,000 = x*18.5989
x = 45,00,000/18.5989
x = 241,949.79
.
Therefore , Mary have to save $241,949.79 annually to reach her goal.
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3. Mary have saving plan with replacement rate equal to 75% of her preretirement income $60,000.00....
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