Vanessa Wants to Retire in 25 Years with Enough Saved

question 110

Multiple Choice

Vanessa wants to retire in 25 years with enough saved to be able to withdraw $5,000 monthly for 20 years. She has already accumulated $48,000 in her investment account. Assume that the rate of interest is 4.8% compounded annually for the 25 years of her contributions, and changes to 3.6% compounded monthly for the next 20 years. Determine what annual contributions she has to make for the next 25 years in order to meet her objective.

• A) $38,449.13
• B) $22,923.85
• C) $20,202.68
• D) $18,468.85
• E) $15,066.33

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Definitions:

Income Tax Write-Off

An income tax write-off refers to a deduction that lowers a person's or entity's taxable income, reducing the tax owed by recognizing expenses or losses.

Debt Or Equity Securities

Financial instruments representing a loan made by an investor to a borrower or ownership interests in a company or entity, respectively.

Investment Account

An account held at a financial institution that holds investments such as stocks, bonds, mutual funds, and other assets for investors.

Equity Methods

An accounting technique used to record investments in other entities where the investor has significant influence over the investee but does not have full control.