Question

You plan to retire in 30 years and plan on saving $15,000 annually, starting next year, for the next 30 years. You expect to need $120,000 about 18 years from now for college tuition for your recently born daughter which must be paid out of these savings. You expect to live 35 years during retirement (the first retirement payment will be 31 years from today).

1. If you assume an interest rate of 8.15% over the entire period, how much will you have available to spend annually in retirement in assuming you plan to purchase a $200,000 summer retirement home five years after you retire (the purchase will be made in year 35)?

Answer 1

solution from the given data, we have b) Computer the future value of ganual payments of the end of the lighth year in the following manner. Lutere value = annually payment x / 7 Citrate period = annually payment & rate 8.16 ((1+8.15%)18 = $ 15,000 x / 3 Z 8.16% 7 -$570,019.90 Hence, at the end of 18th year the investor would I have $670,019.90, and after payment of tuition See he would have 450,019,90 Cf 570,019.90– $120,000) for his retise ment. * please rate *