5) Consider a retirement savings account where the monthly contribution is $125 for the first 10 years, is increased to $225 for the next 25 years, and then is increased once again to $400 for the last 5 years. The APR is always 6.6% compounded monthly. What is the value of the account at the end of 40 years?
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- Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
- You plan to prepare for retirement by making monthly contributions $1,500 to a savings account that pays 10% interest per year, compounded continuously. 4. Determine the accumulated savings in this account after 30-year (360-month) investment. The accumulated savings in Part (a) will be used to provide a monthly annuity for the next 10 years after 30-year investment. What is the amount of the annuity if the interest rate and compounding frequency do not change? (a) (b)After retirement, you expect to live for 25 years. You would like to have a $95,000 income each year. The annual interest rate is 9 percent per year. Required: Calculate the amount of savings you have in your retirement account to receive this income. A) Assume that the payments start on the day of your retirement. B) Assume that the payments start one year after the retirement.After retirement, you expect to live for 25 years. You would like to have a $95,000 income each year. The annual interest rate is 9 percent per year. Required: Calculate the amount of savings you have in your retirement account to receive this income. 1 Assume that the payments start on the day of your retirement. 2.Assume that the payments start one year after the retirement.
- Choose the appropriate formula type for answering the following question: Suppose you want to have $410,500 for retirement in 15 years. Your account earns 6.5% interest. How much would you need to deposit in the account each month? Annuity Compound Interest Loan/Payout AnnuityFor 40 years, you invest $200 per month at an APR of 4.8% compounded monthly, then you retire and plan to live on your retirement nest egg. a) How much is in your account on retirement? b) Suppose you set up your account as a perpetuity on retirement. What will your monthly income be? (Assume that the APR remains at 4.8% compounded monthly.) c) Suppose now you use the balance in your account for a life annuity instead of a perpetuity. If your life expectancy is 21 years, what will your monthly income be? (Again, assume that the APR remains at 4.8% compounded monthly.) d) Compare the total amount you invested with your total return from part c. Assume that you live 21 years after retirement.You decide to make monthly payments into a retirement fund earning 4.75% compounded monthly. Note: Payments are made at the end of each period. Use this information for the questions below. Use the Saving for Retirement information above to answer this question. If your monthly payments are $147, how much will you have in your retirement fund after 40 years? $_________. Round to the nearest dollar.
- To supplement your retirement, you estimate that you need to accumulate $290,000 exactly 41 years from today. You plan to make equal, end-of-year deposits into an account paying 8% annual interest. a. How large must the annual deposits be to create the $290,000 fund by the end of 41 years? b. If you can afford to deposit only $800 per year into the account, how much will you have accumulated in 41 years?Suppose that you save for retirement by contributing the same amount each month from your 23 rd birthday until your 65th birthday, in a retirement account that pays a steady return of 7.5 percent compounded monthly? Every month you save $100.Suppose that starting at age 25, you make steady contributions to a retirement account (with initial balance 0). What should your yearly contribution be if you want to have a balance of $815,000 after 40 years? Assume your account will earn 7% interest, compounded continuously. (Round your answer to the nearest dollar.)