Multiplying the rate by account balance for different rate

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Mr. Richards has a client ready to retire. They have approximately, $1.5 million in an account with the firm. They are very conservative clients and he wants to give them options. The first is to have the money paid out over 30 years earning a 2% rate, then 4%. He also wants to show them that a little risk could preserve their equity so he wants to show the monthly payout of interest only on full balance with rates of 4% and 8%.

Excel: Use the standard TVM setup and calculate the pmt using the two different rates. Calculate the monthly income by multiplying the rate by the account balance for each different rate. Create a summary table show the four different methods, the rates and another column showing the balance after 30 years for each different method.

Written: Briefly describe the analysis that you have performed and explain the effect of compound interest on the payouts. What are the benefits of paying interest only and what are the risks? If this client were retiring in good health with a life expectancy of 40 years, and current income needs of $80,000 per year (not eligible for social security) which payout strategy would you recommend for these clients and why?

Reference no: EM131886292

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