Dylan wants to retire 10 years from now. He plans on saving $125,000 each year until...

Transcribed Image Text:

Dylan wants to retire 10 years from now. He plans on saving $125,000 each year until he retires. He will invest his savings in government securities because he wants a risk-free investment until retirement. U.S. Treasuries are expected to have a return of 3% per year for the next 10 years. Once he retires, he will take the amount that he has saved and invest it in a pension fund. In retirement, he would like an annual income of $100,000 per year for 25 years. What annual IRR does his pension fund need to achieve over the 25 years that he is retired in order to afford his retirement plan? Dylan wants to retire 10 years from now. He plans on saving $125,000 each year until he retires. He will invest his savings in government securities because he wants a risk-free investment until retirement. U.S. Treasuries are expected to have a return of 3% per year for the next 10 years. Once he retires, he will take the amount that he has saved and invest it in a pension fund. In retirement, he would like an annual income of $100,000 per year for 25 years. What annual IRR does his pension fund need to achieve over the 25 years that he is retired in order to afford his retirement plan?

Answer rating: 100% (QA)

To calculate the annual Internal Rate of Return IRR that Dylans pension fund needs to achieve we need to find the present value of his retirement inco... View the full answer