Question

3. (5 points) You are a graduate student and planning to save for retirement over the next 30 account. The return of the stock account is expected to be 10 percent, will pay 6 percent. When you retire, you will combine your percent return. How much can you withdraw each month from your account assuming year withdrawal period? bond and the bond account account with an 8 a 30- money into an 5 points) Steve needs a 30-year, fixed-rate mortgage to buy a new home for $250,000. His ortgage bank will lend you the money at a 6 percent APR for this 360-month loan. However, can only afford monthly payments of $1000, so Steve offers to pay off any remaining loan lance at the end of the loan in the form of a single balloon payment. How large will this loon payment have to be for him to keep his monthly payments at $1000?

Answer 1

3.

Stock account: FV of AnnuityPeriodic payment(1+ rate)Anumber of periods-1/rate] Periodic payment $ Rate Number of periods 2 4 800.00 10% per annum 30 years 360 months FV of Annuity $ 18,08,390.34 10 Bond account: FV of AnnuityPeriodic payment(1+ rate)Anumber of periods-1/rate] Periodic payment Rate Number of periods 12 13 14 15 16 17 6% per annum 30 years 360 months FV of Annuity $ 4,01,806.02 Total amount saved at the retirement period $22,10,196.36 19

20 Withdrawal every month for a period of 30 years PV of Annuity Periodic payment * [1- (1+rate)A-number of periods)/rate] 21 23 24 25 26 27 28 29 $ PV of Annuity Rate Number of periods 22,10,196.36 896 | 30 years 360 months Periodic payment 16,217.64