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3134 - Retirement Problems
Course: Financial Analytics (FIN3134)
24 Documents
Students shared 24 documents in this course
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1. You are 30 years old and you want to retire at age 65. You plan to save $500 per month in
a retirement account that earns an annual interest rate of 8%. How much will you have in
your retirement account when you retire, assuming you make the same contribution each
month until you retire?
Answer: You will have $383,355.12 in your retirement account when you retire. This can be
calculated using the formula: Future value = (Monthly contribution) x (((1 + (Annual interest
rate/12))^(Number of months) - 1) / (Annual interest rate/12)). Plugging in the values, we get:
Future value = ($500) x (((1 + (0.08/12))^(360 months) - 1) / (0.08/12)) = $383,355.12.
2. You are 50 years old and you want to retire at age 65. You currently have $100,000 in a
retirement account that earns an annual interest rate of 6%. How much do you need to
contribute each month to reach your retirement goal of $500,000, assuming you make the
same contribution each month until you retire?
Answer: You need to contribute $1,473.61 per month to reach your retirement goal. This can be
calculated using the formula: Monthly contribution = (Desired future value) / (((1 + (Annual
interest rate/12))^(Number of months) - 1) / (Annual interest rate/12)). Plugging in the values,
we get: Monthly contribution = ($500,000) / (((1 + (0.06/12))^(180 months) - 1) / (0.06/12)) =
$1,473.61.
3. You are 40 years old and you want to retire at age 65. You currently have $200,000 in a
retirement account that earns an annual interest rate of 5%. You plan to contribute an
additional $300 per month to your retirement account until you retire. How much will
you have in your retirement account when you retire?
