Question

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 71.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after he fully retires on the day he turns 71.0, he will wants to have $2,820,304.00 in his retirement account. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 5.00% interest rate. SHOW FINANCE CALCULATOR STROKES

Answer 1

Derek wants 2,820,304 on the day he fully retires which is 1 year after he turn 71, so it is the 72nd period.

In order to calculate the payments to make each year, we have to calculate the value of money outstanding at the 65th period, which is when he retires(but not completely).

To do that, we put in the following strokes.

FV - 2,820,304

N - 7 (72-65)

PMT - 0

I/Y - 5%

CPT - PV = 2,004,337

This the value at period 65. Now we put in the following strokes to Compute the payments in each period.

FV - 2,004,337

N - 39 (65-26)

I/Y - 5%

CPT - PMT - 17,567.26

Hence, he has to make 17,567.26 dollar payment every period to get that amount at 72nd period.