Homework Sourseyou are planning to save for retirement over the next 15 yea
you are planning to save for retirement over the next 15 years to do this you will invest $700 a month in a stock account and $400 a month in a bond account. The return of the stock account is expected to be 10 precent and the bond account will pay 6 precent. When you retire, you will combine your money into an account with a 8 precent return.
How much can you withdraw each month from your account assuming a 20 year withdrawal period ?
you are planning to save for retirement over the next 15 years to do this you will invest $700 a month in a stock account and $400 a month in a bond account. The return of the stock account is expected to be 10 precent and the bond account will pay 6 precent. When you retire, you will combine your money into an account with a 8 precent return.
How much can you withdraw each month from your account assuming a 20 year withdrawal period ?
you are planning to save for retirement over the next 15 years to do this you will invest $700 a month in a stock account and $400 a month in a bond account. The return of the stock account is expected to be 10 precent and the bond account will pay 6 precent. When you retire, you will combine your money into an account with a 8 precent return.
How much can you withdraw each month from your account assuming a 20 year withdrawal period ?
Solution
FV of investment in stock = annuity*[(1+r)^n -1 /r] r = 10/12 = .83% n = 15*12 =180
700*[(1.0083)^180 -1 /.0083]
FV = 700*[415.815] = 291071
FV of investment in bond market = annuity*[(1+r)^n -1 /r] r= 6/12 =.5% n = 15*12 = 180
400*[(1.005)^180 -1 /.005]
FV = 400*[290.818] = 116327.5
total fund at the time of retirement = 116327.5+291071 = 407398.5
Formula for PMT = r*PV / 1-(1+r)^-n r =8/12 = .666% n = 20*12 =240
.00666*407398.5 / 1-(1.00666)^-240
2713.274 / .7967 = 3405.616
amount to be withdrawn per month = 3405.616
