HACE 3200 1nd Edition Lecture 32Outline of Last Lecture I. Estate PlanningII. Funeral planningIII. Basic Organization of a willOutline of Current Lecture I. Practice ProblemsYou 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= 80,000I/Y= 13N= 17 yearsCpt FV= 638,886.233,000,000- 638,886.23= 2,361,113.772) FVA= 2,361,113.77I/Y= 13N=17 yearsCPT PMT= $43,936.64 annual paymentCalculate 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= 95,000N= 45I/Y= 3.5CPT FV= 446,724.06These 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= 446,724.06I/Y=(1.13/1.035) -1 x 100= 9.1787N= 15 yearsCPT PVA= 3,563,220.013) FVA= 3,563,220.01I/Y= 13N= 45 yearsCPT PMT= $1,901.23Calculate 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= 3,700,000N= 45 yearsI/Y= 10CPT PMT= $5,147It 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)= 45,500I/Y= 3N=30 yearsCPT FV= 110,440.442) PMT= 110,440.44I/Y= (1.11/1.03)- 1 x 100= 7.7670N= 30 yearsCPT PV= $1,271,154.93It 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 returnof 12%. Calculate how much you need to save each year to fund your retirement account.Answer:1) PV= 45,000( .80)= 36,000I/Y=4N= 40 yearsCPT FV= 172, 836.742) PMT= 172,836.74I/Y= (1.12/1.04)-1 x 100= 7.6923N= 40 yearsCPT PVA= 2,130,948.653) FVA= 2,130,948.65I/Y= 12N= 40 yearsCPT PMT= $2,777.96Calculate 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)= 60,000N=42 yearsI/Y= 5.2CPT FV= 504,443.262) PMT= 504,443.26I/Y= (1.095/1.052)-1 x 100= 4.0875N= 20 yearsCPT PVA= 6,802, 764.773) FVA= 6,802,764.77N= 42 yearsI/Y= 9.5CPT PMT=
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