You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100, 000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a. How much should you save in an interest - bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100, 000 every year for 30 years after retirement? Assume that the interest in the interest - bearing account is compounded monthly.
You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100, 000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a. How much should you save in an interest - bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100, 000 every year for 30 years after retirement? Assume that the interest in the interest - bearing account is compounded monthly.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 23P
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You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time which will allow you an annual withdrawal of $100, 000 every year for 30 years. The average interest rate between now and the 20th year is likely to be 4% p.a. From then onwards, for the next 30 years, it is likely to be 6% p.a. How much should you save in an interest - bearing account at the end of each month to be able to have enough money at the time of retirement which will allow you your desired withdrawal of $100, 000 every year for 30 years after retirement? Assume that the interest in the interest - bearing account is compounded monthly.
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