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c) She expects to live for 20 years if she retires at 65 and 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Annual withdrawals if she retires at 65:-
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Conclusion: You should use Bank A as it pays higher interest. b) Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest. If fund must be left in deposit until the end of compounding period, which is annual compounding for Bank A, I would prefer Bank A due to higher return. However, if fund must be withdrawn earlier than one year period, I would prefer Bank B due to its daily compounding, and no return from Bank A due to less than compounding period.
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b) How much will be in the account immediately after you make the first withdrawal? The first year interest + PV: ( First year FV first withdrawal: )
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YTC: ( ( )[ ( ) ) ( ] )
What return should investors expect to earn on these bonds? In this case, we can see that coupon rate > rd, bond sells at a premium. Bonds value > par.
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