Spears is planning to retire in 7 years and plans
to start saving $15,000 a year beginning at the end
of this year until the date she retires. She currently
has $280,000 at the bank. Once she retires, she plans
to start redeeming $21,000 each year for 26 years.
If she can expect to earn 9% before her retirement
and 7.5% after her retirement, which of the following
answers would best describe her situation?
a) On her retirement date, she'll have a surplus of $412,568.
b) On her retirement date, she'll have a surplus of $35,245.
c) On her retirement date, she'll have a surplus of $142,895.
d) On her retirement date, she'll have a deficit of $35,245.
The correct answer is: a)
Step 1: How much will she have accumulated her wealth by the time she retires?
PV = 280,000; PMT = 15,000; N = 7; I = 9%
Therefore, FV = 649.875
Step 2: How much will she need by her retirement
date in order to finance her retirement
PMT = 21,000; N = 26; I = 7.5%
Therefore, PV = 237,289
Step 3: Surplus/Shortfall at retirement
= (what she'll have) - (what she'll need)
= 649,857 - 237,289
Surplus = 412,568
2005 CFA Level 1 LOS: 2.1.A.a-2.1.A.c
The correct answer is b. To initiate 12b-1 fee charges in a mutual fund, there must be a majority vote by the full board ...
The correct answer is b. Any time the actual growth rate of the separate account exceeds the account’s AIR, the payment will ...
The correct answer is a) Spinning is the act of selling hot issues to the personal accounts of corporate officers which in ...
The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
- No results found.