Question

P38 38 41 Age 66 is the normal age people can collect social security benefit at full amount 42 At age 62, people can start to collect social security benefit, but at a rate of 25% less than the full amount. 43 Assume you will live for 35 years after age of 62 44 Plan A: You collect your social security benefit when you turn to 66 years old, you will receive $3,000 per month 45 Plan B: You collect social security benefit when you turn to 62 years old, you will receive $2,250 (75% of $3,000 per month. 45 If the annual interest rate is 3% (0.25% per month) 47 2. (5%) How many periods (months) do you have if you choose plan A? Write your answer here 49 b.(5%) How many periods (months) do you have if you choose plan B? Write your answer here 52. (10%) Put in the relevant information in the following box and calculate the present value of all cash flows for Plan B Plan B 54 Collect at 62 55 Monthly Payment 56 Terme 57 Interest rate 58 PV Write your answer here 60 d. (10%) Put in the relevant information in the following box and calculate the present value of all cash flows for Plan A at age 66. Plan A 62 Collect at 66 63 Monthly payment 64 Payment 65 interest rate 66 PV at 66 Write your answer here 68 e. (10%) Convert the PV at 66 you just found to PV at 62 69 PV at 62 Write your answer here 71 f. (5%) Based on your findings above, which plan you should choose Write your answer here Sheet1 Sheet2

Answer 1

As per rules I am answering the first 4 subparts of the question

a	No of periods in Plan A	372
b	No of periods in Plan B	420
c	Plan B
Collect at 62
Monthly payment	2250
Term	420
Interest rate	0.25%
PV	$584,643.08
d	Plan A
Collect at 66
Monthly payment	3000
Term	372
Interest rate	0.25%
PV	$725,985.74

AutoSave © of CHO- Book1 - Excel Sign in File Home Insert Draw Page Layout Formulas Data Review View Help O Tell me what you want to do Calibri = = = det -9 - A À - A - ab E 3- General $ - % 9 Insert SX Delete, Format BShare o - A r ÅT O T. ZU Sort & Find & Filter Select Paste B I U - Conditional Format as Formatting Table Cell Styles Clipboard Font Alignment Number Styles Cells Editing A1 - : X V for a A H. B No of periods in Plan A =(35-(66-62))*12 1 ja 2 3 b No of periods in Plan B =(35*12) A Plan B 5c 6 Collect at 62 7 Monthly payment 8 Term 9 Interest rate 10 PV 2250 420 0.0025 =PV(B9,38,-B7) 11 Plan A 3000 12 d 13 Collect at 66 14 Monthly payment 15 Term 16 Interest rate 17 PV 18 372 0.0025 =PV(B16,B15,-B14) 10