QUESTION 2 (15 marks) You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to recei

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Question 2 15 Marks You Plan To Retire In Exactly 20 Years Your Goal Is To Create A Fund That Will Allow You To Recei 1 (115.17 KiB) Viewed 36 times

QUESTION 2 (15 marks) You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $120,000 at the end of each year for the 25 years between retirement and death (health studies have indicated that most people die 25 years after retirement). You know that you will be able to earn 3% per year during the 25-year retirement period. a) How large of a lump-sum will you need to have in your retirement fund at retirement to ensure you can receive/access $120,000 retirement annuity for the 25 years of your retirement? (5 marks) b) What single lump-sum amount should you open your retirement account with today to ensure the lump-sum amount you calculated in part a is in your retirement fund at retirement. Assume you earn 2% per year during the 20 years preceding retirement? (4 marks) c) Assume you are unable to open a retirement savings fund today with the single lump-sum calculated in part b. You are however, given an alternative option to make annual payments for the next twenty years until retirement. What annual amount should you pay into the retirement fund to ensure you have the lump- sum calculated in part a available at the end of the twenty years? (3 years) d) You open another annuity account to enjoy tax savings. The annuity account earns an annual interest of 2%, however all deposits must be made at the beginning of the year. You have decided to deposit $7,200 per year for the next twenty (20) years. How much money will you have at the end of the twentieth year? (3 marks)