Question

Amortization & Sinking funds??? HELP PLEASE

Answer 1

Jennifer is the owner of a video game and entertainment software retail store. She is currently planning to retire in 30 years and wishes to withdraw $7,000/month for 20 years from her retirement account starting at that time. How much must she contribute each month for 30 years into a retirement account earning interest at the rate of 3%/year compounded monthly to meet her retirement goal? (Round your answer to the nearest cent.)

Answer 2

do you have a website or book i can look at , for the formula

Answer 3

Let me see what I can pull up

Answer 4

http://www.math.uh.edu/~vandanas/1313_5.3.pdf

Answer 5

thankyou

Answer 6

so to withdraw 7000/mth for 20 years you need a total of 7000 * 20 = 140000

Answer 7

that is what your retirement account balance should be in 30 years

Answer 8

so you need to get 140,000 dollars in 30 years into your retirement account, ok?

Answer 9

ok ok so now I have 140,000 so now I need to find out the monthly payments right?

Answer 10

right,

Answer 11

so would it be 590.24?

Answer 12

hmm ok

Answer 13

Well, 7000 per month for 20 years is 7000 x 20 x12 = 1,680,000.
If she withdraws it all, that means taking interest and principal.

Answer 14

woops, i didnt see per month

Answer 15

You must have a book that tells you how to find the sum of monthly payments at indicated interest rates. It should also tell you how to get a certain amount of money at a certain interest rate when you are withdrawing both principal and interest for so many years. I don't have these formulas at hand.

Answer 16

m=12
s = 7000 * 12 * 20 = 1 680 000
n = m*t = 12 * 30 = 360
i = .03 / 12 = .0025
R = i * s / ( ( 1 + i ) ^n - 1 )
R = .0025 * 1 680 000 / [ ( 1 + .0025)^360 -1 ] = 6118.737

Answer 17

http://www.math.uh.edu/~vandanas/1313_5.3.pdf there was this I posted , it contains the formulas but so far what I've been doing on other is using my TVM solver on my calculator but I had the present value but this one is telling me to find the monthly payments?

Answer 18

and I tried multiply the 12 by almost everything and I can't seem to find it and I'm not sure which formula to use for this I don't really understand what the question is asking

Answer 19

dont listen to him

Answer 20

m=12 s = 7000 * 12 * 20 = 1 680 000
n = m*t = 12 * 30 = 360
i = .03 / 12 = .0025
R = i * s / ( ( 1 + i ) ^n - 1 )
R = .0025 * 1 680 000 / [ ( 1 + .0025)^360 -1 ] = 6118.74

Answer 21

ok thank you I will try that equation !

Answer 22

it wasnt it :( this is a sample question and the answer if that helps


Jennifer is the owner of a video game and entertainment software retail store. She is currently planning to retire in 30 years and wishes to withdraw $9,000/month for 20 years from her retirement account starting at that time. How much must she contribute each month for 30 years into a retirement account earning interest at the rate of 4%/year compounded monthly to meet her retirement goal? (Round your answer to the nearest cent.)

2139.90

Answer 23

this is what my teacher said about the first one

This is a two step process - save and then withdraw so there are two time frames and therefore two problems. Look at the TVM parameters. You can't figure out the FV of the saving part without knowing the monthly payment, but that's what you are looking for so you have to figure out how much she needs to save in order to meet the retirement requirements. You have to work through the last 20 years before you can figure out what to do during the first 30 years.

Answer 24

ok so that is a similar question?

Answer 25

yes it is

Answer 26

one moment, brb

Answer 27

OK

Answer 28

ok i tried it, im not sure how they got 2139.9

Answer 29

is there an explanation?

Answer 30

I think the problem is, the money is still making interest while she is withdrawing

Answer 31

so its sinking fund both ways

Answer 32

ok so you have a fund that you are taking money out

Answer 33

hi

Answer 34

im still very confused

Answer 35

i think u need to ask your instructor to be sure

Answer 36

the problem is, she is not taking all of the retirement money all at once

Answer 37

Right, first I have to find out how much the 20 year was before I can do the 30 year withdrawl

Answer 38

working it out for u

Answer 39

7000 = Pv(.03/12) / [1 - (1 + 0.03/12)^(-12*20)]

1262176.401 = PV

so in thirty years she needs to save
$1,262,176.401

1262176.401 = PMT[(1 + .03/12)^(12 * 30) - 1] / (.03/12)

$2165.945618 = PMT

she needs to invest
$2165.945618 a month at 3% compounded monthly for 30 years

then she will achieve the amount of $1,262,176.401, which is still being compounded at 3% monthly for the next 20 years while she draws a payment of $7,000 a month. At the end of the 50 years she will have a balance of $0

Answer 40

Sample question solution:

9000 = Pv(.04/12) / [1 - (1 + .04/12)^(-12*20)]

$1,485,196.873 = PV

so in thirty years she needs to save
$1,485,196.873

$1,485,196.873 = PMT[(1 + .04/12)^(12 * 30) - 1] / (.04/12)

$2139.900583 = PMT

she needs to invest
$2139.900583 a month at 4% compounded monthly for 30 years
then she will achieve the amount of $1,485,196.873, which is still being compounded at 4% monthly for the next 20 years while she draws a payment of $9000 a month. At the end of the 50 years she will have a balance of $0

Answer 41

yay thank you! it worked !!!