Your friend is celebrating her 26th birthday today and wants to start saving for her anticipated retirement at age 66. 1
Posted: Fri Jul 01, 2022 7:50 am
Your friend is celebrating her 26th birthday today and wants to start saving for her anticipated retirement at age 66.
1.She estimates that the annual spending needs would be $330,000 based on the current price level, and the inflation rate is expected to be 4% per year.
2.She wants to be able to make withdrawals for spending needs each year for 23 years following her retirement; the first withdrawal will be on her 67th birthday.
3.She expects to give $8,000,000 gift to her children on her 70th birthday.
4.She intends to invest her money in a conservative fund, which offers 6 percent interest per year after retirement.
5.Before retirement, your friend invests in stock funds, which offer 8 % interest per year.
6.She decides to buy a $6,000,000 apartment. She will pay a 5% down payment for her home on her 31st birthday. She will then pay the rest with the annual mortgage for 30 years at a 4% mortgage rate, starting from her 32nd birthday.
7.She will get a $420,000 annual salary on her 27th birthday, and the salary is expected to increase by 6%. The last salary will be paid on her 66th birthday.
8.If she starts making these deposits on her 27th birthday. What proportion of salary should she save each year?
a.Expected annual consumption needs on 67th birthday.
b.Present value of all retirement consumption needs (value at her 26th birthday).
c.Present value of the $8,000,000 gift to her children (value at her 26th birthday).
d.Present value of all down payments (value at her 26th birthday).
e.Present value of all mortgage payments (value at her 26th birthday).
1.She estimates that the annual spending needs would be $330,000 based on the current price level, and the inflation rate is expected to be 4% per year.
2.She wants to be able to make withdrawals for spending needs each year for 23 years following her retirement; the first withdrawal will be on her 67th birthday.
3.She expects to give $8,000,000 gift to her children on her 70th birthday.
4.She intends to invest her money in a conservative fund, which offers 6 percent interest per year after retirement.
5.Before retirement, your friend invests in stock funds, which offer 8 % interest per year.
6.She decides to buy a $6,000,000 apartment. She will pay a 5% down payment for her home on her 31st birthday. She will then pay the rest with the annual mortgage for 30 years at a 4% mortgage rate, starting from her 32nd birthday.
7.She will get a $420,000 annual salary on her 27th birthday, and the salary is expected to increase by 6%. The last salary will be paid on her 66th birthday.
8.If she starts making these deposits on her 27th birthday. What proportion of salary should she save each year?
a.Expected annual consumption needs on 67th birthday.
b.Present value of all retirement consumption needs (value at her 26th birthday).
c.Present value of the $8,000,000 gift to her children (value at her 26th birthday).
d.Present value of all down payments (value at her 26th birthday).
e.Present value of all mortgage payments (value at her 26th birthday).