1. You are currently 20 years old and are able to invest $450 at the end of each month in a retirement account with 100% matching by your employer. The money goes into investments that will earn an average of 9% in the future. You are wondering if you can live comfortably on the investments if you were to retire at age 60 and live to age 80. Given your investments, how much would you be able to spend each month during retirement, assuming that you withdrew the payment at the beginning of every month?
$37,624.96
$12,556.98
$3,455.98
$37,907.15
2. Against all odds, you won the lottery and are offered the choices below. Your required rate of return is 6%.
1. $250,000 per year for 20 years, with the payments starting today.
2. $130,000 per year for 40 years with the first payment beginning at the end of this year.
What is the PV of the best option?
$1,956,018.59
$3,039,529.12
$5,000,000
$23,627,185.95