It's your first day of work on the new job at Retirement Inc., a local provider of retirement planning solutions. You want to put your finance skills to work and open the first client dossier:

• The client just turned 40.
• Her plan is to safe $15'000 at the end of each year, for the first time on her 41^st birthday, until she retires at the age of 65 (last payment on the 65^th birthday).
• After retirement, she plans to use the accumulated capital in 20 equal tranches, starting on the 66^th birthday and ending on the 85^th birthday.
• The rate of return is 5%.

Based on this information, carefully answer the following questions:

a)How much money can your client expect to have upon retirement (right after the last investment)?

b)What's the annual rent after retirement?

c)Suppose the client aims for an annual rent of $100'000 after retirement. What annual saving payments are required to reach this goal?

Answer rating: 100% (QA)

To calculate the answers to these questions we can use the concept of annuities and present value calculations Lets break down the calculations for ea... View the full answer