This preview shows pages 1–2. Sign up to view the full content.
Fin3331.0228a
(1) Assume that you will retire at age 65 and that you will live to
age 80. You wish to provide supplemental retirement income of
18,000 per year before taxes for your retirement. Assume that you
are 22 years old. How much must you set aside per year for your
retirement, assuming that you can earn 17 percent on your money?
Part 1: Lump sum needed at retirement. N=80 – 65 =15, PMT =
18,000, FV=0, i = 17. CPT PV= – 95,835.37
Part 2: FV= 95,835.37, i= 17, PV=0, n=65 – 22 = 43, CPT PMT= –
19.07.
How much would you have to contribute, assuming that you could
earn 6 percent on your investments?
Part 1: Lump sum needed at retirement. N=80 – 65 =15, PMT =
18,000, FV=0, i = 6. CPT PV= – 174,820.48
Part 2: FV= 174,820.48, i= 6, PV=0, n=65 – 22 = 43, CPT PMT= –
932.33.
Note: Your maximum Social Security benefit is 18,000 per year.
Your annual contribution, assuming that you earn 30,000 per year
is 6 percent of 30, 000, or 1,800. Your employer also makes a 6
percent contribution on your behalf, or 1,800. The combined
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 02/22/2011 for the course FIN 3331 taught by Professor Nowacki during the Spring '09 term at Troy.
 Spring '09
 NOWACKI

Click to edit the document details