When Thomas retire 40 years from now you plan to make 10 annual withdrawals from your account
Question:
When Thomas retire 40 years from now you plan to make 10 annual withdrawals from your account at Grey Bank at the end of each year, until the 50th year. You will need $130,000 each year for 2 years, $145,000 each year for 3 years and $165,000 each year for your years, then a final withdrawal of $190,000 in the final year of retirement.
Thomas want to start saving for retirement from today by making monthly payments for 20 years into an account in Richmond Bank that yields 8 percent compounded monthly. After these deposits you plan to put the money into an account at Grey Bank until retirement earning interest of 10 percent compounded annually.
a) What is the value of these withdrawals at the end of year 40?
b) What is the value of these withdrawals at the end of year 20?
c) What should these monthly payments be in order to satisfy your retirement needs?
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter