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Question: bilbo baggins wants to save money to meet three objectives...

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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 $25,000 per month for 25 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 $574,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $700,000 to his nephew Frodo. He can afford to save $1,800 per month for the next 15 years. If he can earn a 10 percent EAR before he retires and a 6 percent EAR after he retires, how much will he have to save each month in years 16 through 30? Possible answers: (1) $9,704.85 (2) $8,970.81 (3) $8,794.91 (4) $9,936.80 (5) $8,619.02

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