Ron is planning for retirement and hopes to make withdraws of $3,600 at the end

Question

Ron is planning for retirement and hopes to make withdraws of $3,600 at the end of each month for 19 years once he's retired. He plans on retiring in 25 years. (a Find the amount that Ron must have n his retirement account n 25 years from now in order to achieve his financial retrement goal assur ing that oece he is rend be w ten 4% compounded monthly. S Preview (b) If Ron plans to work for another 25 years and also plans to make monthly deposits in a retirement account during that time, how much should Ron deposit in the account each month so that he can achieve his financial retirement goal assuming that he can earn 5% compounded monthly. S Preview Polnts possible: 1 This is attempt 1 of 4 Post this question to forum Submit

Explanation / Answer

(a) Number of months of withdrawal 228 (19*12) Amount of withdrawal each month $3,600 Monthly interest rate=(4/12)% amount required in retirement account $574,282 (using PV functionof excelwith Rate=(4/12)%, nper=228,Pmt=-3600) (b) Monthly interest =(5/12)% Future Value required= $574,282 Number of months of deposits 300 (25*12) Monthly deposits required $964.35 (using PMT functionof excelwith Rate=(5/12)%, nper=300,FV=-574282) Monthly interest=0.08/12= 0.006666667 Value of the note after 7 months $     4,923.77 (4700*(1.006666667^7) Discount rate (monthly)=0.094/12= 0.007833333 Number of months left 3 Amount of Proceeds $     4,809.85 (4923.77/(1.0078333333^3) Interest rate per six month =(5/2)%=2.5% Amount paid beginning of each six month $1,000 Number of six monthly periods= 8 Future value of bthe annuity $8,954.52 (Using ExcelFV function with Rate=2.5%, Nper=8, Pmt=-1000,Type=1)

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