Question: Consider a person who begins contributing to a retirement plan
Consider a person who begins contributing to a retirement plan at age 25 and contributes for 40 years until retirement at age 65. For the first ten years, she contributes $3,000 per year. She increases the contribution rate to $5,000 per year in years 11 through 20. This is followed by increases to $10,000 per year in years 21 through 30 and to $15,000 per year for the last ten years. This money earns a 9 percent return. First compute the value of the retirement plan when she turns age 65. Then compute the annual payment she would receive over the next 40 years if the wealth was converted to an annuity payment at 8 percent.
Relevant QuestionsWhat is the present value, when interest rates are 7.5 percent, of a $50 payment made every year forever? If the future value of an ordinary, 6-year annuity is $8,500 and interest rates are 9.5 percent, what’s the future value of the same annuity due? Consider Gavin, a new freshman who has just received a Stafford student loan and started college. He plans to obtain the maximum loan from Stafford at the beginning of each year. Although Gavin does not have to make any ...Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying a $15,000 down payment. If you get a 15-year mortgage with a 7 percent interest rate, what are the monthly payments? What would the ...How do FIs alleviate the problem of liquidity risk faced by investors wishing to invest in securities of corporations?
Post your question