WORKSHEET 4.3-Saving for the Goal of Retirement Look at your long-term goals fro
ID: 2820036 • Letter: W
Question
WORKSHEET 4.3-Saving for the Goal of Retirement Look at your long-term goals from Chapter 1. Is there a set age that you want to retire? Complete the following worksheet based on your desired age for retirement Number ofyears from retirement: Ct Desired amount in retirement savings: 9- Given a 5% annual interest rate, use the FVIFA table or formula to calculate how much money you need to save per year Given a 7% annual interest rate, use the FVIFA table or formula to calculate how much money you Given a 10% annual interest rate, use the FVIFA table or formula to calculate how much money you to save Plan of action, given these findings:Explanation / Answer
According to the information :
Number of years for retirement = Number of periods n = 31 years
Desired amount at the end of retirement or at the end of 31 years = $2.2 million
a) Interest rate r = 5%
FVIFA ( Future value interest factor Annuity) = [(1+r)n-1] / r
= [(1+0.05)31-1 / 0.05
= [ (1.05)31 -1 / 0.05
= [4.5380 -1] / 0.05
= 70.7608
PMT ( Or payment made each year) = Expected retirement value/ FVIFA
= 2200000/70.7608
= $31090.66
Every year savings of $31090.66 is required to get a retirement amount of 2.2 million at 5% interest rate.
b) Similarly for 7 %
FVIFA = [(1+r)n-1] / r
= [(1+0.07)31-1] / 0.07
= [8.1451-1] / 0.07
= 102.0730
PMT = 2200000 / 102.0730
= $21553.202
Every year savings of $21553.202 is required to get a retirement amount of 2.2 million at 7% interest rate.
c) For 10 %
FVIFA = [(1+r)n-1] / r
= [(1+0.10)31-1] / 0.10
= [19.19434-1] / 0.1
= 18.19434/0.10
= 181.9434
PMT = 2200000/ 181.9434
= $12091.672
Every year savings of $12091.672 is required to get a retirement amount of 2.2 million at 10% interest rate.
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