70.2K

Verified Solution

Link Copied!

A) You have exactly 45 years until retirement. You will be making monthly deposits into your relatively RISKY retirement account that is expected to earn either APR=4.8% or APR=9.6%. (Only one of the two values makes sense; you have to identify the correct one.) The first deposit equal to $1,100 will be made one month from today, the last deposit will be exactly 45 years from now (the day you retire). Every month, the amount of your next deposit will grow by 0.3% compared to the one from the previous month. How much money will you have in your retirement account on the day you retire? B) On the day of your retirement (exactly 45 years from today), you plan to transfer the value of your retirement account (computed in part (A)) into a safe account that has an expected return of either 5.8% or 9.8% per year (only one of those numbers makes sense, and you have to pick that one). You will make the first annual withdrawal ($C) from that account exactly one year after you retire, and you will be making subsequent annual withdrawals (growing at a rate of 2% per year) for a total of 25 years (so the last withdrawal will be 25 years after you retire). After 25 years, you expect to have no money in the account. What will be the value of your first withdrawal, $C

Answer & Explanation Solved by verified expert

See Answer