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Investment Project

Investment Project
Section I:   Investments Goals
1) Saving for retirement – I have estimated my life expectancy to be 90 years based on an online calculator (http://www.livingto100.com/) that calculates your life expectancy based on stress, historical family illnesses, and personal habits (eating/drinking/smoking etc.).   My expected annual income for becoming an accountant is expected to start off around $30,000 a year.   Accountants with up to 1 year of experience range from $31,500 to $48,250, and accountants with 1 to 3 years experience salary range from $36,000 to $60,000 (http://www.bls.gov/oco/ocos001.htm).   I am expecting to have at least one year of experience by my 25th birthday (all money is calculated as nominal as of the age of 25, when I will begin saving for my retirement).   Since the future is often unknown and uncontrollable I have made the following assumptions about my retirement:
• Desired retirement age – 70
• Life expectancy – 90
• Years of payments into retirement fund – 45 (starting at the age of 25)
• Expected nominal return before retirement – 10%
• Expected nominal return after retirement – 8%
• Expected interested rate based on historical data ≈ 4%
• Desired amount each year in real income after retirement - $65,000
*Note:   Expected return is lower after retirement due the fact as I become older I will become more conservative.
1a) The required size of my retirement account at the point of retirement (Note:   computation in bold).
Year 1 N = 45 I% = 4 PV = 65,000 PMT = 0 FV = -379,676.42 P/Y = 1 C/Y = 1
The future value of $65,000 in 45 years at 4% inflation = $379,676.42 (annual income required 1st year).   This calculation calculates the future value of $65,000 at the time of my retirement (age 70).   In other words, my first year of retirement I will need $379,676.42 to maintain the standard of living I could have today with $65,000
Real rate of return = (1.08)/(1.04) – 1 = .0384615
The real rate of return is calculated to...