Retirement plan-assume that laverty currently has no savings

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Retirement Plan: Professor Laverty wants to retire to the mountains as soon as possible. However, he would like to accumulate some savings before he retires. He believes that he can earn a nominal annual rate of 12 percent (compounded monthly) on any funds he puts aside. Professor Laverty has already accumulated $100,000 and he plans to put aside an additional $2000 at the end of each month until retirement. (Assume no taxes unless otherwise indicated.)

A) If Professor Laverty retires in ten years, how much savings will he have accumulated?

B) Refer to part A. Assume that Laverty expects to live 30 years beyond retirement. Therefore he draws down his life savings by receiving a constant payment every month for 30 years. Unfortunately, this income is taxable at 15%. How much disposable income will Laverty have each month?

C) Assume that Laverty currently has no savings, but he is willing to start saving $2,500 per month. Laverty wants to accumulate $1,000,000 before he retires. How soon can Laverty retire?

Reference no: EM13848194

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