1. Mary is 65 years old and about to retire. She has 1 million dollar saved to supplement her pension and Social Security, and would like to withdraw it in equal annual dollar amounts so that nothing is left after 15 years How much does she have to withdraw each year if she earns 8% on her money?
2. Tom’s home is currently valued, on a replacement cost basis, at $400,000. The last time he checked his home was insured for $300,000 and he did not have an inflation guard endorsement. If he has a $40,000 claim due to a kitchen fire, how much will his homeowner’s insurance policy pay? How much would he be paid if his home were totally destroyed? In order to obtain full replacement coverage, how much insurance should Tom carry on his house?