Open the "Retirement" sheet in the Excel file.

The table includes key parameters:

Starting Salary $$ The annual income at the beginning of a career.

Average Salary Increase $$ Expected annual salary growth.

Percent Salary Invested $$ Portion of salary saved for retirement.

Working ROI $$ Expected return on investments during working years.

Inflation Rate $$ Annual rise in cost of living.

Retirement ROI $$ Investment return after retirement.

Retirement Years $$ Expected duration of retirement.

Retirement Pay Target $$ The annual amount needed during retirement.

Desired Amount Needed at Retirement $$ The total amount required at retirement.

Using these values, calculate the total retirement savings needed and whether the savings plan is sufficient by: Estimating how much savings will grow over time using compound interest. Determining if the total savings at retirement is enough to sustain the target annual withdrawals.

Analysis Questions:

How much money will the person have saved by retirement? Will the savings be sufficient for $40$ years of retirement? What happens if salary growth is lower or the ROI changes?

Part $2$: Lottery Annuity Valuation

Instructions

Open the "Lottery" sheet.

The table provides details about a PowerBall lottery payout, including:

Total Prize Today Interest $($ROI$)$ Rate First Annuity Payment Annual Increase in Payments

Calculate the total value of the annuity:

Use the future value of annuity formula to determine how much the entire payout is worth over time. Compare the annuity to a lump sum payout $($assume a discount rate of $5\%).$

Analysis Questions:

Would it be better to take a lump sum or an annuity?How does the interest rate affect the total value of winnings?What happens if the annual increase is lower or higher?

Bonus Questions $($for extra credit$)$

Modify the retirement savings rate and ROI assumptions to see how savings are affected.

Change the PowerBall ROI rate and analyze its impact on winnings.

Create "What$-$If$"$ Scenarios:

What if inflation rises to $4\%?$What if the student saves $15\%$ instead of $10\%?$ What if the student wins $$1$ billion in PowerBall?

A Parameter B Value Starting Salary $60000$ Average Salary Increase $0\mathrm{.}05$ Percent Salary Invested $0\mathrm{.}1$ Working ROI $0\mathrm{.}09$ Inflation $0\mathrm{.}03$ Retirement ROI $0\mathrm{.}04$ Retirement Years $40$ Retirement Pay Target $80000$ Desired Amount Needed at Retirement $-260963$

Parameter B Value PowerBall Total Prize Today $52600000$ Interest $($ROI$)$ Rate $0\mathrm{.}05$ First Payment $7433495$ Annual Increase $0\mathrm{.}05$