A. In order to send your only child to law school when the time comes, you want to accumulate
$4,000,000 at the end of 18 years. Assuming that your savings account will pay 6.5%
compounded annually, how much would you have to deposit if:
a. you want to deposit an amount annually at the end of each year? (3 Marks)
b. you want to deposit one large lump sum today? (3 Marks)
B. Suppose you are 40 years old and plan to retire in exactly 20 years. 21 years from now you will
need to withdraw $5,000 per year from a retirement fund to supplement your social security
payments. You expect to live to the age of 85. How much money should you place in the
retirement fund each year for the next 20 years to reach your retirement goal if you can earn 12%
interest per year from the fund? (4 Marks)