The following worksheets correspond to assignments for the individual units in this
lesson. Once you have completed all of these worksheets, send the saved
workbook to the instructor before the closing date for this lesson.

Retirement Planning–Assume that you plan to retire at age 67 and that current mortality tables
suggest that you will live for 28 years after retirement. You desire a fixed retirement income that has
the same purchasing power at age 67 that $75,000 has today. Retirement income will begin the day
of retirement with an entire year’s income being withdrawn the first day of the year. You expect 2.5%
annual inflation. You have $125,000 in your retirement account and expect a return of 9.5% per
annum. How much must you save each year (with deposits made at the end of the year) to meet
your retirement goal?
Retirement age
67
Retirement Savings
$125,000
401K return
9.5%
Retirement years
28
Real Fixed Income
$75,000
Inflation
2.5%
Your current age
Work Area

35

Annual retirement savings

You just purchased a bond which matures in n years. The bond has a face value of
$1,000, and has the coupon rate noted with annual coupon payments. Given the
current yield below, what is the bond’s yield to maturity?
INPUT
DATA

Work Area

m
n

1
12

Current
Yield
Coupon
YTM

7.96%
8.00%

M

$1,000

Suppose Turner Enterprises sold an issue of bonds with the following original maturity (n),
par value (M), coupon rate, and semiannual interest payments. Two years after the bonds
were issued, the going rate of interest on bonds such as these rose to 14%. At what price
would the bonds sell? At what price would the bonds sell if the interest rate had fallen to
9%?
INPUT DATA
Par

$1,000
B2

WORK AREA

n

25

rd2a

14.00%

m
rd2b

2

year

2

9.00%

coupon rate

11.41%