Question

,,I=_ Possible Points: 8 possible points (added to Exam 1 score) Helpful Hint: Begin by making a number line to help structure the problem. Count the dates you will deposit/withdraw from the account. This will help ensure you have the number of payments correct. Requirements: 1. (4 points) Using your present age, calculate the annual deposit you must make to an account so that you will have accumulated $2 million at retirement Amount of annual deposit=_ 1. Calculated Using: n=. PV= FV= 2. Assume that you will retire on your seventieth birthday. 3. Assume that you make your first deposit on your next birthday and the last deposit on your 69th birthday. Use the last digit in your student number to determine the interest rate. For example, if the last digit is 6, assume you can earn 6% on your savings, compounded annually; if the last digit is a 1, assume you can earn 1% on your savings; if the last digit is a 0, assume you can earn 10% on your savings. 2. (4 points) Calculate the amount that you can withdraw from your retirement savings each year so that is nothing left when you die. Amount of annual withdrawal= 1. Calculated Using: n=_ PV= FV= 2. Assume that your life expectancy is 95 years.
My current age to be used in the problem: 20 years old.

My next birthday: October 15th, 2020

Last digit in student code: 4.

Answer 1

1.

First, let's create a timeline

21st will be your next birthday.

last deposit will at 69th birthday

Total No of deposit you will make = 49

please count both 21st and 69th, if you just take the difference between 69 and 21 then it is only 48.

You will retire at the 70th birthday.

You need $2 million at 70th birthday,

so every Deposit we made in the beginning so turn your calculator in beginning mode.

Enter the following data in your financial calculator

N=49, PV= 0 , I/y = 4 , FV = $2000000 and Find PMT

PMT (Beg) = -$13714.25.

Hence you will need to pay $13714 every year to accumulate $2 on the 70th Birthday.