Reference no: EM131226737

Time Value Money - Show work / calculations.

Instructions:

You are required to participate in the discussions in this course.

Discussion topic:

On occasion, you'll run into situations where you need to combine TVM tools. Let's take a look at a situation we can all relate to-retirement planning. Suppose you want to retire in 30 years with enough saved to earn $50,000 per year for 25 years. Presume that you have not yet saved anything toward retirement. Your plan is to make equal contributions over the next 30 years to a retirement account that will earn 8% per year. How would you go about figuring out how much your annual payments need to be to achieve your retirement savings goal?

We will soon notice that the problem posed here seems to have just one answer. Recognizing that you will want to do some original thinking on this, please revise the variables in the problem posed above to ones that are most relevant to you, a relative or a friend.

Or randomly choose from the following options:

Suppose you want to retire in (choose 1: 10 - 20 - 30) years with enough saved to earn (choose 1: $30K - $50K - $70K) per year for 15 - 25 - 35 years. Presume that you have not saved anything [OR have saved $100K] towards retirement yet. Your plan is to make equal contributions over the next (choose 1: 10 - 20 - 30) years to a retirement account that will earn (choose 1: 5 - 8 - 10) percent per year.

List your variables and report back how much you have to have saved in FV terms, as well as how much you'll need to save in each of the next x years.

NOTE: For the moment please do not complicate your thinking and calculations by trying to take inflation into account. First we want to make sure you understand how to combine use of these formulas successfully without worrying about inflation. Later in the course after many of you have posted we can have some discussion on how to account for inflation.