Future value of annuity
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Doug has developed a financial retirement strategy. His plan is to invest in somewhat risky stocks for 20 years and then move everything to low risk bonds for the retirement years as described below. He presently has $150,000 in a retirement account that will be re-invested in a stock fund that has historically earned 10% annually (EAR) with no dividends. The plan is to add an additional $1,000 to the fund at the end of each month for 15 years. When he retires, he will reinvest the stock fund in a tax-free municipal bonds and live on the coupons only that have a coupon rate of 3.5% paid semi-annually. (the bonds will be donated to charity upon his death).
How much will he receive semi-annually during retirement?
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Solution Summary
The solution explains the different steps to compute the future value of each investment and shows how to calculate the semi-annual coupon payment.
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How much will he receive semi-annually during retirement?
Doug has developed a financial retirement strategy. His plan is to invest in somewhat risky stocks for 20 years and then move everything to low risk bonds for the retirement years as described below. He presently has $150,000 in a retirement account that will be re-invested in a stock fund that has historically earned 10% annually (EAR) with no dividends. The ...
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