FIN 419 Chapter 4 P4–23 Funding your retirement You plan to retire in exactly 20 years. Your goal is to create a fund that

FIN 419

FIN 419 Chapter 4 P4–23 Funding your retirement You plan to retire in exactly 20 years. Your

Chapter 4 P4–23

Finance for Decision making

University of Phoenix

FIN 419: Finance for Decision making

FIN 419 Chapter 4 P4–23 Funding your retirement You plan to retire in exactly 20 years. Your goal is to create a fund that

Chapter 4 P4–23 Funding your retirement You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year during the 30-year retirement period.

a. How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity?

b. How much will you need today as a single amount to provide the fund calculated in part a if you earn only 9% per year during the 20 years preceding retirement?

c. What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a and b? Explain.

                                                  CLICK HERE FOR SOLUTION