You are planning to save for retirement over the next 30 years. To save for retirement,...

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Finance

You are planning to save for retirement over the next 30 years.To save for retirement, you will invest $1,150 per month in a stockaccount in real dollars and $540 per month in a bond account inreal dollars. The effective annual return of the stock account isexpected to be 13 percent, and the bond account will earn 6percent. When you retire, you will combine your money into anaccount with an effective return of 8 percent. The returns arestated in nominal terms. The inflation rate over this period isexpected to be 3 percent.

How much can you withdraw each month from your account in realterms assuming a 25-year withdrawal period? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
  Monthly withdrawal $

What is the nominal dollar amount of your last withdrawal?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

  Last withdrawal $

Answer & Explanation Solved by verified expert

4.3 Ratings (629 Votes)

First we calculate amount we will have after 30 years in stock and bond account we can use financial calculator with below key strokes to find out future values in these 2 accounts Stock account N no of months 3012 360 PMT monthly deposit 1150 PV present value 0 IY return 130012 1083 CPT See Answer

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You are planning to save for retirement over the next 30 years.To save for retirement, you will invest $1,150 per month in a stockaccount in real dollars and $540 per month in a bond account inreal dollars. The effective annual return of the stock account isexpected to be 13 percent, and the bond account will earn 6percent. When you retire, you will combine your money into anaccount with an effective return of 8 percent. The returns arestated in nominal terms. The inflation rate over this period isexpected to be 3 percent. How much can you withdraw each month from your account in realterms assuming a 25-year withdrawal period? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Monthly withdrawal$ What is the nominal dollar amount of your last withdrawal?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.) Last withdrawal$