Time Value of Money DIFFICULT QUESTION! Finance majors please help!?

Hey guys, so basically my professor wouldn't give me the time of day.. or even acknowledge my existence. I'm so confused and no one seems to be able to help.. hopefully someone can on here.





Suzy wants to retire in 30 yrs. Expects to live 25 yrs after retirement. She prepares a savings plan to meet the objectives: first, after retirement she would like to be able to withdraw $20,000 per month. The first withdrawal will occur at the end of the first month after retirement. Second, she would like to leave her daughter a $500,000 inheritance. Lastly, she wants to set up a fund that will pay $5000 per month forever to her favorite charity after she dies. These payments will begin one month after she dies. All the monies earn 10% annual rate compounded monthly. How much will she have to save per month to meet these objectives? She wishes to make her first deposit from now and the last deposit on the day she retires.





a) 1,550


b) 1,014


c)603


d) 1105


e)1306


f)1202


g)430


h)983|||She makes her first deposit one month from today and the last on the date she retires. That's an Ordinary Annuity. Set up a time frame. Today is T-0. She retires at T-30 and lives until T-55.


Interest is 10%, compounded monthly, for all calculations = .83333%





At T-55, she must have on deposit (a) a fund to provide 5,000 per month in Perpetuity, beginning one month after she dies. That amount = 600,024. (x .83333% = 5,000) plus an inheritance of 500,000. Total required at T-55 = 1,100,024.


Its PV at T-30, compounded over 300 months = 91,236





So at T-30, she must have saved 91,236 plus an amount to give her a monthly annuity of 20,000, beginning at T-30 for 300 mos. The PV at T-30 of such an annuity is 2,200,945. So together she must have on deposit at T-30 $2,292,181. She must save $1,014 per month from today for 360 mos


to meet her goal.