HACE 3200 1nd Edition Lecture 32 Outline of Last Lecture I Estate Planning II Funeral planning III Basic Organization of a will Outline of Current Lecture I Practice Problems You already have 80 000 in your retirement account earning an annual rate of return of 13 You will leave this amount in your account and allow it to grow for the next 17 years You know you would like to have 3 000 000 in your retirement account in 17years Considering how much the 80 000 will be worth in 17 years how much more do you need to contribute to this account annually at 13 in order to have 3 000 000 in 17 years Answer 1 PV 80 000 I Y 13 N 17 years Cpt FV 638 886 23 3 000 000 638 886 23 2 361 113 77 2 FVA 2 361 113 77 I Y 13 N 17 years CPT PMT 43 936 64 annual payment Calculate how much you will need to invest each year while working into your retirement account if you want to maintain the same standard of living in retirement as you have now You are currently earning 95 000 Inflation is 3 5 Your investments will earn an annual rate of return of 13 You will retire in 45 years and you will be retired for 15 years Answer 1 PV 95 000 N 45 I Y 3 5 CPT FV 446 724 06 These 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 2 PMT 446 724 06 I Y 1 13 1 035 1 x 100 9 1787 N 15 years CPT PVA 3 563 220 01 3 FVA 3 563 220 01 I Y 13 N 45 years CPT PMT 1 901 23 Calculate how much you will need to invest save annually if you want to have 3 700 000 in your retirement account in 45 years if your investments will earn an annual rate of return of 10 Answer FVA 3 700 000 N 45 years I Y 10 CPT PMT 5 147 It is 2008 and you are currently living on 65 000 a year You plan on retiring in 30 years and estimate that you can survive on 70 of your today s income when you reach retirement You estimate that you will be retired for 30 years you have a very long life expectancy Inflation is currently 3 Your retirement account will earn an annual rate of return of 11 Calculate how much you need in your retirement account in total when you retire in 30 years Answer 1 PV 65 000 70 45 500 I Y 3 N 30 years CPT FV 110 440 44 2 PMT 110 440 44 I Y 1 11 1 03 1 x 100 7 7670 N 30 years CPT PV 1 271 154 93 It is 2008 and you are currently living on 45 000 a year You plan on retiring in 40 years and estimate that you can survive on 80 of your today s living expenses when you reach retirement You estimate that you will be retired for 40 years you have a very long life expectancy Inflation is currently 4 Your retirement account will earn an annual rate of return of 12 Calculate how much you need to save each year to fund your retirement account Answer 1 PV 45 000 80 36 000 I Y 4 N 40 years CPT FV 172 836 74 2 PMT 172 836 74 I Y 1 12 1 04 1 x 100 7 6923 N 40 years CPT PVA 2 130 948 65 3 FVA 2 130 948 65 I Y 12 N 40 years CPT PMT 2 777 96 Calculate how much you will need to invest each year if you want to live on 75 of your current salary in retirement You are currently earning 80 000 Inflation is 5 2 Your investments will earn an annual rate of return of 9 5 You will retire in 42 years and you will be retired for 20 years Answer 1 PV 80 000 75 60 000 N 42 years I Y 5 2 CPT FV 504 443 26 2 PMT 504 443 26 I Y 1 095 1 052 1 x 100 4 0875 N 20 years CPT PVA 6 802 764 77 3 FVA 6 802 764 77 N 42 years I Y 9 5 CPT PMT 14 612 57
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