a) Your roommate heard that you took Fundamentals of Finance with Prof. Hasler and that you learnt about the idea of building a nest egg for your retirement. Your roommate has a crazy idea and asks you to work out the math for this idea. The idea is to get a job in an investment bank, work very hard and live a very frugal live in order to save as much as possible at the end of every year for 15 years. Then, retire and live a crazy live for 25 years in which you withdraw $200,000 at the end of every year to travel around the world, eat the best food, and drink expensive wine. Eventually, you want to settle down and withdraw a nice $100,000 at the end of every year forever. How much do you need to save at the end of every year while you work as an investment banker to afford this lifestyle? Assume an interest rate of 8% per year. (Enter your answer in dollars with 2 decimal places.

b)Show the main formulas and the main calculation steps to solve the previous question

Answer rating: 100% (QA)

Solution a Savings Required per Year To calculate the savings required we need to consider three phases of your roommates plan 1 Accumulation Phase 15 ... View the full answer