Question

1. You wish to retire in 37 years with annual retirement income from your savings of $109,126 per year. You expect to draw this annual payment for 22 years. How much to the nearest whole dollar must you contribute to your retirement savings each year in order to be able to withdraw $109,126 during retirement if your retirement savings will earn 12.3% per year between now and when you retire, and 8.5% per year after you retire?

QUESTION 93

1. Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 2-year Treasury bond is 11.5 percent and the rate on a 1-year Treasury bond is 13.5 percent, what rate of interest should you expect on a 1-year Treasury bond one year from now? Calculate your answer using the geometric average. State your answer as a percentage to 2 decimal places (i.e. xx.xx)

QUESTION 94

1. Your grandparents deposited $5,570 for you when you were born 18 years ago. Today, the account (to which no other deposits have been made) is worth $206,637. What annually compounded rate of return has the account earned? State your answer as a percentage to 2 decimal places (i.e. xx.xx)

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Answer 1

92)

Amount required for retirement income Px[1-(1:(1+r)^n)]=r Here, 8.5% 22 A Interest rate per annum B Number of years C|Number of compoundings per per annum A:C Interest rate per period (r) BxC Number of periods (n) Payment per period (P) 8.5% 22 109,126 Amount required for retirement income $ 1,070,503.75 109126x(1-(1:(1+8.5%)^22)):8.5%

Each deposit (P) FVA:([(1+r)^n-1]=r) Here, A Interest rate per annum B Number of years C Number of payments per per annum A:C Interest rate per period (r) BxC Number of periods (n) Future value of annuity (FVA) 12.3% 37 1 12.3% 37 1,070,503.75 $ Each deposit (P) $ 1,825.67 1070503.75=(((1+12.3%)^37-1):12.3%)

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