Question
SLPaper 2
Yejin plans to retire at age 60. She wants to create an annuity fund, which will pay her a monthly allowance of $4000 at the end of each month during her retirement. She wants to save enough money so that the payments last for 30 years. A financial advisor has told her that she can expect to earn 5% interest on her funds, compounded annually.
1.[3]
Calculate the amount Yejin needs to have saved into her annuity fund, in order to meet her retirement goal.
Verified
Solution
- Values of the calculator should be
- N = 30 x 12 (years x monthly for allowance)
- Interest = 0.05
- PV = ?
- PMT = 4000
- FV = 0 (all money used by retirment goal, marks the minimum PV)
- P/Y = 12
- C/Y = 1
- Insert values into GDC with END
- Hence
A1 A1 A1
2.[3]
Yejin has just turned 28 years old. She currently has no retirement savings. She wants to save part of her salary at the end of each month into her annuity fund.
Calculate the amount Yejin needs to save each month, to meet her retirement goal given the same annual interest and annual compounding.
Verified
Solution
- Values of the calculator should be
- (retirment age - current age x monthly payments of salary)
- Interest = 0.05
- PV = 0
- PMT = ?
- FV = 754638 (needs this much from part a)
- P/Y = 12
- C/Y = 1
- Insert values into GDC with END
- Hence
A1 A1 A1
