Your best friend Frank just celebrated his 30th birthday and wants to start saving for his...

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Finance

Your best friend Frank just celebrated his 30th birthday andwants to start saving for his anticipated retirement. Frank plansto retire in 35 years and believes that he will have 20 good yearsof retirement and believes that if he can withdraw $90,000 at theend of each year, he can enjoy his retirement. Assume that areasonable rate of interest for Frank for all scenarios presentedbelow is 8% per year. This is an annual rate, review eachindividual question for more specifics on compounding periods peryear.
1. If Frank decides to make monthly deposits for 35 to reach hissame retirement goal, how much must Frank start depositing onemonth from today?
2. If Frank decides instead to take exotic vacations each yearfor the next 5 years, and delay putting aside funds for that time,(1st deposit at the end of 6 years from now, leaving only 30 yearsto grow his retirement nest egg), what amount must he depositannually to be able to make the desired withdrawals atretirement?

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3.9 Ratings (461 Votes)

1 Withdrawals required for 20 years X 90000 years Interest Rate r 8 Number of years 30 years Value required at end of 35 years to withdraw 90000 See Answer

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Your best friend Frank just celebrated his 30th birthday andwants to start saving for his anticipated retirement. Frank plansto retire in 35 years and believes that he will have 20 good yearsof retirement and believes that if he can withdraw $90,000 at theend of each year, he can enjoy his retirement. Assume that areasonable rate of interest for Frank for all scenarios presentedbelow is 8% per year. This is an annual rate, review eachindividual question for more specifics on compounding periods peryear.1. If Frank decides to make monthly deposits for 35 to reach hissame retirement goal, how much must Frank start depositing onemonth from today?2. If Frank decides instead to take exotic vacations each yearfor the next 5 years, and delay putting aside funds for that time,(1st deposit at the end of 6 years from now, leaving only 30 yearsto grow his retirement nest egg), what amount must he depositannually to be able to make the desired withdrawals atretirement?