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Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to
retire 30 years from now with retirement income of $29,000 per month for 30 years, with the
first payment received 30 years and 1 month from now. Second, he would like to purchase a
cabin in Rivendell in 15 years at an estimated cost of $693,000. Third, after he passes on at the
end of the 30 years of withdrawals, he would like to leave an inheritance of $750,000 to his
nephew Frodo. He can afford to save $2,000 per month for the next 15 years. If he can earn a 11
percent EAR before he retires and a 9 percent EAR after he retires, how much will he have to
save each month in Years 16 through 30 ?

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  • 1. Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $29,000 per month for 30 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 15 years at an estimated cost of $693,000. Third, after he passes on at the end of the 30 years of withdrawals, he would like to leave an inheritance of $750,000 to his nephew Frodo. He can afford to save $2,000 per month for the next 15 years. If he can earn a 11 percent EAR before he retires and a 9 percent EAR after he retires, how much will he have to save each month in Years 16 through 30 ?