An Engineer Invests $2000 In An Individual Retirement Account (IRA) Each Year During Her 40 Year...
An Engineer Invests $2000 In An Individual Retirement Account (IRA) Each Year During Her 40 Year Career. Assume The Investment Earns An 8% rate of return. what annual income can be drawn from the investment for the 30 year following her retirement? A) 46000 B)2670 C) 17300 D)4500 E) none of the above
Homework Answers
Yearly investment = 2000
Time period = 40 years
Rate of return = 8%
What annual income can be drawn from the investment for the 30 year following her retirement?
Step 1
Calculate Future Value of the investments
FV = 2000 (F/A, 8%, 40)
FV = 2000 (259.05651)
FV = 518,113
FV at 40th year = 518,113
Let this amount is the Present value
Now calculate annual income can be drawn from the investment for the 30 year
A = P (A/P, 8%, 30)
A = 518,113 (A/P, 8%, 30)
A = 518,113 (0.08883) = 46,023.9 or 40,024
The answer nearer to this value given in the option is 46,000
Answer - A) $46,000
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