You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $23,000 at the end of each year for the 35 years between retirement and death? . You know that you will be able to earn 9% per year during the 35 year retirement period.
a) How large a fund will you need when you retire in 20 years to provide the 35 year $ 23,000 retirement annuity? Round to nearest cent
b) How much will you need today as a single amount to provide the fund calculated in part a if you earn only 7% per year during the 20 years preeceding retirement is $ _____ round to nearest cent
c) What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in parts a and b? Explain Select from below options
In the calculations of present values, you should notice that the higher the interest rate, the lower the present value.
Therefore in part a and b both values would be (1)_________. In other words, a (2) __________ sum would be needed in 20 years for the annuity and a (3)______ amount would have to be put away today to accumulate the needed future sum. Choose from below
1) higher equal or lower 2) equal, smaller or higher 3) higher, smaller or equal
D) Assuming that you will earn 8% from now through the end of your retirement, the amount of the fund will you need when you retire in 20 years is $ _____Round to nearest cent.
E) If you want to make 20 end of year deposits into your retirement account that will fund the 35 year stream of $23,000 annual annuity payments, your annual deposits will be $ ________round to nearest cent