A. You are currently 25 years old. You plan to retire when you are 60. You guess that you will need to support yourself for 35 in retirement. You currently have $60000 already invested in the stock market which you estimate will make an average return of 10% per year going forward. In addition, you plan to put $1000 into a savings account at the end of every month until you retire. This account has an interest rate of 9% per annum compounded monthly. After you retire you will move all money from both of the above accounts to a retirement account that pays 6% per annum compounded monthly. How much can you take out of this account every month so that you have $0 in the account on your 95th birthday?

B. You need to borrow $1000. You have the following options.

a. Bank A offers an account that pays interest semi-annually with an APR of 9.8%

b. Bank B offers an account that pays interest daily with an APR of 9.2%

c. Bank C offers an account that pays interest yearly with an APR of 9.5%

d. Bank D offers an account that pays interest monthly with an APR of 9.3%

What will the difference in dollars be between borrowing the $1000 for one year from the best option versus the worst option, i.e. how much extra interest will you pay?

Answer rating: 100% (QA)

a PV Amount available 60000 P Monthly amount 1000 n 3512 420 months n1 35 years r1 ... View the full answer