# FINANCIAL ANALYSIS - PORTFOLIO PAPER. Mathematics & Economics (Math Problem Sample)

Topic: Financial Analysis - Portfolio Paper

Pages: 6

Sources: 4

Format: APA

Deadline: 24 hours

Instructions:

The company you work for will deposit $150 at the end of each month into your retirement fund. Interest is compounded monthly. You plan to retire 25 years from now and estimate that you will need to withdraw $2,000 per month during retirement, which will last 30 years. If the account pays 12% compounded monthly, how much do you need to put into the account each month, in addition to your company's deposit, in order to meet your retirement needs?

A minimum of 3 references are required for each part, including the text, books, and articles from academic sources (Net Library), and other periodicals.

Financial Analysis

Institutional Affiliation

Date

Introduction

The statement problem is about time value of money and will be solved using two approaches namely; the present value and the future value of money. The future value approach is also known as the compounding approach. Compounding refers to increasing the value of money over time due to interest earned both on principal and the accumulated interest. Interest earned in a previous period is reinvested together with the principal in the preceding period to generate additional revenue, and the sequence continues until the specified maturity period elapses. In a retirement scheme, compounding takes into consideration; the periodic installments deposits, the prevailing market rate of return and the frequency of compounding in a year. The higher the frequency of compounding in a year, the higher the maturity value of an investment.

A retirement benefit scheme provides an individual with an opportunity to make periodic payments as savings at a time when they are employed with an intention to retrieve those funds at a future date. A retirement benefit scheme provides an assurance of a predetermined growth on all funds contributed by members at a predetermined growth rate. Upon maturity of a retirement fund, an individual can opt to withdraw in lump sum the total maturity value or withdraw in terms of periodic equal instalment over a specified period of time.

In my case study, I wish to withdraw the maturity value in form of equal monthly instalments spread along a period of 30 years. It should be noted that the periodic instalments are subjected to a compounding growth rate of 12% per annum for a period of 25 years after then the growth shall stop. Below are computations illustrates whether or not, it’s necessary for me to make additional payments beside what my employer deposits in my retirement fund.

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