HACE 3200 1nd Edition Lecture 30Outline of Last Lecture I. Retirement PlanningII. Social Security III. Pension PlansOutline of Current Lecture I. Practice ProblemsCurrent LectureTVM Finals practice problems.April wants to have 1.75 Million dollars in her retirement account in 45 years. If she gets an annual rate of return of 7.75% on her investment. How much does she need to save each year to have 1.75 million dollars in her account?Answer: $4,885.76FVA= 1.75 MN= 45 yearsi/y= 7.75CPT PMT= $4,885.76Ben wants to retire in 30 years. He needs to have 4.5 million dollars in his retirement account to live his current life style at retirement. How much does Ben have to invest each year to have that much in 30 years if he receives an annual rate of return of 12.5%? Answer: $16,920.70FVA= 4.5 MN=30 yearsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.I/y= 12.5CPT PMT= $16,920.70Courtney is planning for her children’s education. She has 14 children. She expects she will need 2.25 million dollars to put them all through college. Courtney is 31. The children will enter college in 15 years. How much must she put away each year for her children’s education fund? She is currently earning a 9.5% rate of return on her investments. Answer: $73,673.31FVA= 2.25 MN= 15 yearsI/Y= 9.5PMT= $73,673.31Daphne has just retired. She has $1 million dollars in her retirement account. It is earning 8% interest. She is 65 and knows she is going to live only 10 more years. How much can she draw annually out of her account each year until her death in 10 years? Answer: $149,029.49PV= 1 MN=10 yearsI/Y= 8CPT PMT= $149,029.49Eunice has also just retired. She is 65 and her life expectancy is for 20 more years. She has the same $1 million dollars in her account. The account is also earning 8% annual interest. How much can she draw out of her account to live on each year? Answer: $101,852.21PV= 1 MI/Y= 8N= 20 yearsCPT PMT= $101,852.21Joseph began saving for his retirement at age 28. Each year he deposited $2,800 into an IRA account.The account has earned an annual rate of return of 15%. Joseph is 58 years old now. 1) How much is hisIRA worth today? 2) If he stops investing $2,800 annually and lets the account grow at an annual rate of12% annually, how much will be in the account when he retires at age 65? Answer: $2,691,032.431st Part:PMT= 2,800N=30 yearsI/Y= 15FVA= $1,217,286.412nd Part:PV= $1,217,286.41I/Y= 12N= 7CPT FV= $2,691,032.43You would like to have a complete makeover by the time you are 40. You are currently 25 years old. Your makeover will cost $60,000. How much do you need to put away at the end of each year at 9% to have enough money for your transformation? Answer: $2,043.53FVA= 60,000N= 15 yearsI/Y= 9CPT PMT= $2,043.53If you deposit $5,000 in an individual retirement account (IRA) at the end of each year and it grows at a rate of 12.5%, how much will you have at the end of 30 years?Answer: $1,329,732.20PMT= 5,000I/Y= 12.5N= 30 yearsFVA= $1,329,732.20You currently have $23,000 in your retirement account earning an annual rate of return of 11.5%. You will leave this $23,000 in your account and allow it to grow for the next 30 years. You want to have $2,000,000 in your retirement account when you retire in 30 years. How much more do you need in youraccount to have $2,000,000 in 30 years?Answer: $1,397,477PV= 23,000I/Y=11.5N= 30 yearsCPT FV= 602,523.32You have to subtract the FV from 2 million to see how much more he needs in his account to reach his goal.2,000,000,00- 602,523.32=
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