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Unformatted text preview: option III is the best alternative. Using FV instead of PV, which many students will do for part (b), you get I = 1225.04, II = 1277.69, III = 1291.11. 11. (a) PV 525,000 N 10 FV1,000,000 I/Y 6.66% Therefore, he must save more. (b) PV525,000 FV 1,000,000 N 10 I/Y 6 PMT 4,537 (c) Set calculator to annuity due worksheet. For BAII Plus 2 nd BGN END appears 2 nd SET BGN appears 2 nd QUIT back to operation, but now says BGN for annuity due. PV525,000 N 10 I/Y 6 FV 1,000,000 PMT 4,280 (d) $ 1,000,000 = FV $525,000 (12%, 10 yr) + FVA (ord) of PMT (12%, 10 yr) PMT = $35,933 Or PV525,000 N 10 I/Y 12 FV 1,000,000 PMT35,933 That is, he could withdraw $35,933 p.a. and still have $1 million at the end of 10 years because of the higher rate of return. In this case he could actually withdraw $ 35,933 p.a. for the next 10 years and still achieve his $1,000.000 goal at retirement....
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This note was uploaded on 10/14/2011 for the course ADMS 3541 taught by Professor Staff during the Winter '10 term at York University.
 Winter '10
 staff

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