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Author Question: In their meeting with their advisor, Mr. and Mrs. O'Rourke concluded that they would need 40,000 per ... (Read 110 times)

Wadzanai

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on: Jul 10, 2018
In their meeting with their advisor, Mr. and Mrs. O'Rourke concluded that they would need 40,000 per year during their retirement years in order to live comfortably. They will retire 10 years from now and expect a 20-year retirement period.
 
  How much should Mr. and Mrs. O'Rourke deposit now in a bank account paying 9 percent to reach financial happiness during retirement?

Question 2

To achieve the goal of profit maximization for each alternative being considered, a financial manager would select the one that is expected to result in the highest return.
 
  Indicate whether the statement is true or false


akpaschal

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Reply #1 on: Jul 10, 2018
Answer to Question 1

The amount of money required at the beginning of the retirement period is:
n = 20, i = 9
PVA = (CF/r)  1-1/(1+r)n = (40,000/.09 )  1-1/(1.09 )20= 365,142
n = 10, i = 9
PV = 365,142(1.09 )-10 = 154,239.85

Answer to Question 2

TRUE


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