a) You woke up one morning in a cold sweat, because you haven't been saving anything for
Question:
a) You woke up one morning in a cold sweat, because you haven't been saving anything for retirement. You plan to retire in 30 years (at the end of year 30) and would like to have $1.5 million on the day that you retire. How much do you need to save monthly from your paycheck if you plan to earn 8% on your investments to achieve your lump sum goal?
N=30*12
I=8/12
PMT= ?
PV=n/a
FV=1,500,000
b) What if instead of having a lump sum goal, you would like to retire and receive a monthly payment of $6,000 (starting one month after you retire). You estimate your life expectancy in retirement to be 25 years, and can earn 5% on your investments during retirement. How much do you need to save monthly from your paycheck to generate the retirement monthly income you require?
step one:
N=25*12
I=5/12
PMT=6000
PV=?
FV= n/a
Step two:
N=25*12
I=5/12
PMT=?
PV=n/a
FV=1,026,360.328
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow