Question

Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $26,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $288,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $800,000 to his nephew Frodo. He can afford to save $1,900 per month for the next 10 years

Required:

If he can earn a 9 percent EAR before he retires and a 6 percent EAR after he retires, how much will he have to save each month in years 11 through 30? Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $26,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $288,000. Third after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $800,000 to his nephew Frodo. He can afford to save $1,900 per month for the next 10 years. Required: If he can earn a 9 percent EAR before he retires and a 6 percent EAR after he retires, how much will he have to save each month in years 11 through 30?

Answer 1

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PE EPS, STOCK DIVIDEND-Microsoft Excel File Home Insert Page Layout Formulas Data Review View Add-Ins Cut Ea Copy - AutoSum A A Wrap Text 9.. Calibri 11 General Fill Merge & Center A Conditional Format Paste BIU S % Cell Insert Delete Format Sort & Find & 2 Clear Format Painter er Select Formatting ble Styles Clipboard Font Alignment Number Shules Cells Editing DP492 DM DO DR DI DN DE DO DS DT DU DV 492 PRE RETIREMENT APR 493 STEP 1 494 EAR 9% 495 8.6488% EXCEL -NOMINAL(9%,12) NOMINAL RATE 496 497 STEP 2 POST RETIREMENT APR 498 EAR 6% EXCEL NOMINAL(6 %, 12) 5.8411 % 499 NOMINAL RATE 500 EXCEL PV(DP499/12,12*20,-26000) 501 STEP 3 PV OF 26000 PER MONTH 3675992.03 PV OF 800000 (inheritance) 249443.78 EXCEL PV(DP499/12,12*20,,-800000) 502 503 SO HE NEEDS AT RETIREMENT DP501 D503] 504 3925435.82 505 506 STEP 4 SAVINGS 1900 507 RATE 8.6488% 508 TIME YEARS EXCEL FV(DP495/12,10*12,-1900) 509 FV OF SAVINGS 360465.44 510 LEVERAGED BUYSWAP H EV PE EPS DIV ABNORMAL deberk marginal tax PB ROPI APV ROSS price quote CAP GAIN 130% BRIGHAN 4 MARGIN MONEY EVA MVA distress Re erences: AL125 W 07:53 ENG 16-06-2019

PE EPS, STOCK DIVIDEND-Microsoft Excel File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum Wrap Text 9.. Calibri 11 General Fill Copy A Merge & Center Conditional Format Paste BIU S % Cell Insert Delete Format Sort & Find & 2 Clear Format Painter er Select Formatting ble Styles Clipboard Font Alignment Number Shules Cells Editing DP528 DN DI DM DO DE DQ DR DS DT DU DV 510 511 STEP 5 AFTER PURCHASE OF CABIN OF 288000 [- DP509-288000] 512 72465.44 AMOUNT LEFT = 513 514 HE STILL HAS 20 YEARS TO RETIRE 515 FV OF 72465.44 AFTER 20 YEARS 516 EXCEL FV(DP495/12,12*20,, -DP512) 406126.10 517 STEP 6 FV 518 [-DP504-DP517 519 STEP 7 HE WILL BE SHORT OF MONEY BY = 3519309.71 520 3519309.71 521 FV RATE 522 8.6488% 523 TIME 20 YEARS EXCEL PMT(DP522/12,12*20,,-DP521) 5508.81 524 ANSWER MONTHLY SAVINGS 525 526 ANSWER 5508.81 527 528 marginal taxPB ROPI APV ROSS price quoteEVA MVA HEV PE EPS DIVABNORMALdeberk LEVERAGED BUY SWAP CAP GAIN 130 % BRIGHAN 4 MARGIN MONEY distress Re erences: AL125 W 07:53 ENG 16-06-2019