YOU BELIEVE THAT YOU WILL NEED $1,500,000 WHEN YOU RETIRE IN 35 YEA...
6. You believe that you will need $1,500,000 when you retire in 35 years from today. You also know that you will receive an extra payment of $100,000 from your trust fund in 5 years time. How much will you need to save at the end of each of the next 35 years to reach your retirement goal? You can earn 7% on your funds compounded annually because you manage your own money and your undergraduate major was finance. A) $3,667 B) $5,344 C) $10,127 D) $10,850 E) $12,643 Solution B If you invest the $100,000 received in year 5 until your retirement in year 35, it will grow to $100,000 × (1.07)
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= $761,225.50. Therefore, your savings plan would need to generate a future value of only $1,500,000 – $761,225.50 = $738,774.50 Now, using your calculator: FV= 738,774.50, n=35, I/Y = 7, PV=0, COMP PMT PMT = $5,344,26