Ryan has decided to retire once he has $1,500,000 in his retirement account. At
ID: 2679702 • Letter: R
Question
Ryan has decided to retire once he has $1,500,000 in his retirement account. At the end of each year, he will contribute S 7,000 to the account, which is expected to provide an annual return of 7.0%. How many years will it take until he can retire? (Round to the nearest year.) 32 years 36 years 38 years 41 years 37 years Suppose Ryan's friend, Andy, has the same retirement plan, saving $7,000 at the end of each year and retiring once he hits S 1,500,000. However, Andy's account is expected to provide an annual return of 9.4%. How much sooner can Andy retire? (Round to the nearest year.) 6 years 4 years 7 years 8 years 5 years After 25 years, neither Ryan nor Andy will have enough money to retire, but how much more will Andy's account be worth at this time? $107,938 $139,984 $130,073 $186,514 $169,363 Ryan is jealous of Andy because Andy is scheduled to retire before him, so Ryan decides to make whatever end-of-year contribution is necessary to reach the $1,500,000 goal at the same time as Andy. If Ryan continues to earn 7.0% annual interest, what annual contributions must he make in order to retire at the same time as Andy' $11,695 $13,361 $7,751 $3,408Explanation / Answer
1. We have FV = 1500,000, PMT = $7000, Rate=7% & PV =0 So using Excel, No of yrs nper =nper(rate,PMT,PV,FV) = nper(7%,-7000,0,1500000) =41yrs 2. We have FV = 1500,000, PMT = $7000, Rate=9.4% & PV =0 So using Excel, No of yrs nper =nper(rate,PMT,PV,FV) = nper(9.4%,-7000,0,1500000) =34yrs SO Andy can retire 41-34 = 7yrs sooner 3. After 25 yrs, Ryan will have =FV(Rate,nper,PMT,PV) = FV(7%,25,-7000,0)= $442,743 Andy will have = FV(Rate,nper,PMT,PV) = FV(9.4%,25,-7000,0) = $629,257 So Andy will have $629,257 -$442,743 = $186,514 more than Ryan 4. We have FV = 1500,000, Rate=7% & PV =0, nper = 34yrs (Same as Andy) So using Excel, Annual Cont PMT =PMT(rate,nper,PV,FV) = PMT(7%,34,0,1500000) = $11,695 So Ryan has to make annual cont of $11,695
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