1. Suppose that at 35 years old you are a well-paid project leader with Electrolux USA. You plan to work for this company for 20 more years and retire from it with a retirement income of $5000 per month for the rest of your life (assuming very long). Assume an earning rate of 6% per year compounded monthly on your investments. (a) How much must you place into your retirement plan monthly starting at the end of next month (month 1) and ending one month prior to the commencement of the retirement benefit? (b) Alternatively, assume you decided to deposit the required amount once at the end of each year. Determine the annual retirement savings needed to reach your goal. Draw Cash flow diagram.
2. A rich graduate wants to set up a scholarship fund for economically disadvantaged high school seniors who have a mental aptitude to become good engineers. The scholarships will be awarded starting now (year 0) and continue forever to several individuals for a total of $100,000 per year. If investments earn at 5% per year, how much must the alumnus contribute immediately (year 0)? Draw Cash flow diagram.