[MJ_cool]

Question 4 (13 marks)

Another Canadian investor is planning his retirement. Given the following information please help him with his calculations.

(a) What will be the amount in an RRSP after 25 years, at which time he will retire and live off the proceeds, if contributions of $3,000 are made at each year-end for its first seven years and month-end contributions of $500 are made for the subsequent 18 years? Assume that the plan earns 8% compounded quarterly for the first 12 years, and 7% compounded semiannually for the subsequent 13 years. (4 marks)

(b) Your investor would like to set up a Scholarship Fund in his name at Atkinson College with a $500 annual award to a deserving applicant. The first award will be made at the end of the 15th year of his retirement. Subsequent awards will be made at the end of each year perpetually. Given the RRSP amount in part (a) above, how much can your investor expect to withdraw at the end of each month, starting the first month after his retirement, and still be able to set up the Scholarship Fund?
(Assume the interest rate is 10% compounded monthly throughout his retirement.) (6 marks)

(c) What complications might occur in achieving the plan in part (b)?
(3 marks)

[Curlyben]

Please refer to THIS ANNOUNCEMENT

[JoeCanada76]

The sounds of a homework question. Why is that question only worth 13 marks. Is it an assignment?