You are planning your retirement investment plan. Assume you are now twenty-two years old and...
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You are planning your retirement investment plan. Assume you are now twenty-two years old and plan to make investments as follows:
Invest $6,000 at the end of each year for the first ten years.
Invest $12,000 at the end of each year for the second ten years.
Invest $18,000 at the end of each year for the third ten years.
Invest $24,000 at the end of each year for the fourth ten years.
Assume that you invest in a diversified stock portfolio for the entire forty years. You expect that the portfolio will return 12% per year.
a) How much will accumulate in your retirement fund by age sixty-two if your predictions are correct? $___________
b) Now that you are sixty-two, you decide to retire and purchase a guaranteed annuity for the thirty years you expect to live. You will earn 5% on the invested funds and you will receive your annuity payment at the beginning of each year. How much will you receive each year? $___________
c) If you, instead, decide to leave the funds in the diversified portfolio (expected return 12%), how much could you take out of the fund each year and still leave your grandchildren a $1,000,000 inheritance. $___________
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