Suppose you are 40 years old, and your salary is 5,000 per month and you can...
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Suppose you are 40 years old, and your salary is 5,000 per month and you can save 20% of that every month. Every year, you want to increase your saving by the rate of inflation which is 1.6%. You will invest this in an investment account that gives interest at the rate of 5% with monthly compounding, you already have 250,000 in that account. You want to retire in 60 years. At the age of 60, you will use all your savings to buy an insurance plan, which will allow you to withdraw 6,000 per month until you run out of funds. However, the insurance company will add a 2.00 percent premium to the pure premium cost of the purchase price of the annuity. This insurance plan will also have a return of 5% with monthly compounding. Let's assume that the inflation rate after the retirement is zero. How many years will these funds last after your retirement? Suppose you are 40 years old, and your salary is 5,000 per month and you can save 20% of that every month. Every year, you want to increase your saving by the rate of inflation which is 1.6%. You will invest this in an investment account that gives interest at the rate of 5% with monthly compounding, you already have 250,000 in that account. You want to retire in 60 years. At the age of 60, you will use all your savings to buy an insurance plan, which will allow you to withdraw 6,000 per month until you run out of funds. However, the insurance company will add a 2.00 percent premium to the pure premium cost of the purchase price of the annuity. This insurance plan will also have a return of 5% with monthly compounding. Let's assume that the inflation rate after the retirement is zero. How many years will these funds last after your retirement?
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To calculate how many years the funds will last after retirement we need to determine the total amou... View the full answer
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