HomeworkLib
Question

Question 1 (10%) As a part of a retirement plan, CEO intends to invest funds in...

Question 1 (10%)

As a part of a retirement plan, CEO intends to invest funds in a savings account, this savings account is expected to have a minimum of 4.0% per year interest rate. The fund is intended to generate annual income at $95,000 per year indefinitely. Calculate the minimum amount needed to be deposited into this account now.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Minimum interest rate = 4% per year

Annual income = $ 95,000 per year till indefinitely

The present value of the account needed to be deposited

PW - 95.000 -= $2,375,000 0.04

Minimum amount to be deposited = $ 2,375,000

Here the number of years is not mentioned hence I have calculated the amount on the date of retirement.

Let us assume the CEO deposited 30 years before the retirement then the amount required to be deposited today

PW (30 years before retirement) = 2,375,000 × (P/F,4%,30)

= $ 732,256.84

Please use the value $ 2,375,000 as the present worth.

Please contact if having any query will be obliged to you for your generous support. Please help me it mean a lot to me. Thank you.

0 0
Add a comment
Know the answer?
Add Answer to:
Question 1 (10%) As a part of a retirement plan, CEO intends to invest funds in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Part 1: Barry and Samantha Harris – Retirement Savings (15 points) Barry and Samantha are startin...

    Part 1: Barry and Samantha Harris – Retirement Savings (15 points) Barry and Samantha are starting to take their retirement planning seriously. They are both 46 and plan to retire in 20 years at the age of 66. They expect to live 20 years in retirement (a life expectancy of 86). Between their 401k and IRA accounts they currently have $92,400 in retirement savings. They currently have a combined income of $85,000 per year and expect to be able to...

  • CASE PROBLEM: RETIREMENT PLAN Tim is 37 years old and would like to establish a retirement...

    CASE PROBLEM: RETIREMENT PLAN Tim is 37 years old and would like to establish a retirement plan. Develop a spreadsheet model that could be used to assist Tim with retirement planning. Your model should include the following input parameters: Tim's current age = 37 years Tim's current total retirement savings = $259,000 Annual rate of return on retirement savings = 4% Tim's current annual salary = $145,000 Tim's expected annual percentage increase in salary = 2% Tim's percentage of annual...

  • You are 25 years old, having just started working. You are considering a retirement plan for...

    You are 25 years old, having just started working. You are considering a retirement plan for a retirement at the age of 65. You want to be able to withdraw $76,000 from your savings account on each birthday for 20 years following your retirement at the age of 65. Your first withdrawal will be on your 66th birthday. To achieve your goal, you intend to make equal annual deposits in a pension scheme which offers 7% interest per year. According...

  • A recent graduate decided to have $1 million ready for retirement 30 years from now. The estimated retirement money is...

    A recent graduate decided to have $1 million ready for retirement 30 years from now. The estimated retirement money is estimated in today's dollars. Savings will be made each month and will be deposited into a mutual fund which is expected to earn 0.45% per month. If compounding is monthly and inflation rate is expected to be 2% per year for the next 30 years, how much should be saved per month? A recent graduate decided to have $1 million...

  • Retirement Plan Now that you have a house, it’s time for you to plan for retirement....

    Retirement Plan Now that you have a house, it’s time for you to plan for retirement. Your plan is to take a certain amount from your salary at the end of each year and invest it in a 401(K) mutual fund. Then when you get sick of your job and want to retire, you will have a fund that you can withdraw from each year to live on. Let’s assume you want to retire at age 60 and your life...

  • Individual retirement accounts (IRAs) were established by the U.S. government to encourage saving. An individual who...

    Individual retirement accounts (IRAs) were established by the U.S. government to encourage saving. An individual who deposits part of current earnings in an IRA does not have to pay income taxes on the earnings deposited, nor are any income taxes charged on the interest earned by the funds in the IRA. However, when the funds are withdrawn from the IRA, the full amount withdrawn is treated as income and is taxed at the individual’s current income tax rate. In contrast,...

  • Investment A You are 25 years old, having just started working. You are considering a retirement...

    Investment A You are 25 years old, having just started working. You are considering a retirement plan for a retirement at the age of 65. You want to be able to withdraw $79,000 from your savings account on each birthday for 20 years following your retirement at the age of 65. Your first withdrawal will be on your 66th birthday. To achieve your goal, you intend to make equal annual deposits in a pension scheme which offers 7% interest per...

  • Dan and Wayne are brothers who intend to begin saving money for retirement when each is...

    Dan and Wayne are brothers who intend to begin saving money for retirement when each is exactly age 25. Each brother intends to save $4,800 per year before taxes and invest the money to accumulate wealth and to provide income in retirement. Dan plans to invest his savings into a Traditional IRA and anticipates an average annual return of 10%. Wayne plans to invest his savings into a Roth IRA and also anticipates an average annual return of 10%. Both...

  • 20. Assume that you are setting up your retirement plan by considering two investment plans together....

    20. Assume that you are setting up your retirement plan by considering two investment plans together. (Your retirement in 20 years). You want to earn a total of $1,000,000 after 20 years from the following two investment plans together. Investment plan #1 : You currently have $20,000 in the bank and decide to invest that $20,000 in a money market account for 20 years which you feel will generate a return on 6% per year. Investment plan #2: You also...

  • Part 1: Tom and Debbie Flynn - Retirement Savings (15 points) Tom and Debbie are starting...

    Part 1: Tom and Debbie Flynn - Retirement Savings (15 points) Tom and Debbie are starting to take their retirement planning seriously. They are both 46 and plan to retire in 20 years at the age of 66. They expect to live 15 years in retirement (a life expectancy of 81). Between their 401k and IRA accounts they currently have $67,966 in retirement savings They currently have a combined income of $88,000 per year and expect to be able to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT