math108x_document_w08GroupAssignment

.xlsx

School

Brigham Young University, Idaho *

*We aren’t endorsed by this school

Course

108X

Subject

Mathematics

Date

Apr 3, 2024

Type

xlsx

Pages

10

Uploaded by ProfessorOkapiMaster920 on coursehero.com

Mateo is 26 and wants to retire at 65 with a retirement fund from which he can draw an interest income of $150,000 a year. He assumes he will have an average rate of return of 6%. He wants to know how much he needs to save each month to reach his goal and how inflation will affect his retirement savings. In order to earn $150,000 per year in interest, the balance of Mateo's retirement account must be large enough that 6% of the balance is $150,000.
Payment = $13,841.07 Buying Power = $ 47,363.03 Mateo finds a 401K retirement account with a 6% rate of return compounded monthly. He uses the Payment function in Excel to find the amount he needs to save each month to reach his goal. Use the PMT funciton to find the monthly payment below. Now Mateo wants to know how inflation will affect his retirement savings. Use the given Buying Power equation to find out how an average inflation rate of 3% will affect Mateo’s yearly retirement amount of $150,000. (Buying Power is defined as the amount of money that a person or group has avaialbe to spend.)
Mateo's Retirement Key Variables Key Assumptions Identify some of the key variables and assumptions Mateo should consider in the quantitative reasoning process. An interest income of $150,000 a year He can retire at 65 He will have an average return rate by 6%
Is the monthly payment an attainable amount? Is the buying power of $150,000 enough money that Mateo can live comfortably after he retires? After answering the questions above, also discuss how much you think Mateo should save each month. The monthly payment amount is not attainable for the duration he is expecting to pay. There isn't a big enough buying power. He should save as much as he can. He should at least save $1,341 a month.
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