Reference no: EM131513096

Materials to be submitted: A one or two page report. The report should be typed in Word using the equation editor where necessary. All calculations should be included in the report. Submit an electronic copy of the Word document on Blackboard.

At the age of 30, you are able to begin saving a portion of your monthly income. After reviewing your expenses, you decide on a three-phase investment plan covering the next 30 years of your life. Beginning one month from today, you plan to save $350 each month for the next ten years. After that, you plan to increase the amount you set aside each month from $350 to $550, remaining at this level for another ten years. Finally, for the last ten years of your investment program, you plan to save $750 each month. The rate of return on your invested funds is 8.25% APR, compounded monthly. Your starting balance at age 30 is zero. Ignore inflation and taxes.

1. If you withdraw nothing from your account along the way, what will be your account balance 30 years from today?

2. What constant amount should you set aside each month to reach the same ending balance you computed in part 1?

3. Once you reach age 60 (and the end of your 30-year investment horizon), suppose you decide to stop accumulating funds and start spending. Your accumulated investment account is your only source of income. The rate of return on invested funds is 6.75% APR, compounded monthly. Assume you expect to live for another 25 years. How much could you afford to spend each month?