Bilbo Baggins wants to save money to meet three objectives. First, he would like to be...

50.1K

Verified Solution

Question

Finance

Bilbo Baggins wants to save money to meet three objectives.First, he would like to be able to retire 30 years from now withretirement income of $21,000 per month for 20 years, with the firstpayment received 30 years and 1 month from now. Second, he wouldlike to purchase a cabin in Rivendell in 15 years at an estimatedcost of $675,000. Third, after he passes on at the end of the 20years of withdrawals, he would like to leave an inheritance of$500,000 to his nephew Frodo. He can afford to save $2,300 permonth for the next 15 years.

Required:
If he can earn a 9 percent EAR before he retires and a 5 percentEAR after he retires, how much will he have to save each month inyears 16 through 30?
$8,815.19
$7,754.47
$7,602.42
$7,450.38
$8,291.47

Answer & Explanation Solved by verified expert

3.7 Ratings (379 Votes)

Answer Correct answer is 760242 Explanation First let us calculate retirement corpus required after 30 years from now Monthly payment at the end month 21000 Retirement duration 20 years 20 12 months 240 months EAR 5 Monthly interest 1 5 112 1 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Bilbo Baggins wants to save money to meet three objectives.First, he would like to be able to retire 30 years from now withretirement income of $21,000 per month for 20 years, with the firstpayment received 30 years and 1 month from now. Second, he wouldlike to purchase a cabin in Rivendell in 15 years at an estimatedcost of $675,000. Third, after he passes on at the end of the 20years of withdrawals, he would like to leave an inheritance of$500,000 to his nephew Frodo. He can afford to save $2,300 permonth for the next 15 years. Required:If he can earn a 9 percent EAR before he retires and a 5 percentEAR after he retires, how much will he have to save each month inyears 16 through 30?$8,815.19$7,754.47$7,602.42$7,450.38$8,291.47