8. You wish to set up a plan for your retirement. Interest rate is 6%. You...
8. You wish to set up a plan for your retirement. Interest rate is 6%. You will start by placing $2,000 in the account one year from now and increase this by 4% per year. At the end of 40 years (from now) you will start withdrawing (removing) money from the account. If you want the fund to last 20 years from when you retire, how much can you withdraw (remove) from the account annually?
Homework Answers
![We will start solving the problem by calculating the accumulations at the end of 39 years Future value of annuity=FV=? Rate of interest-i-6% per year First deposit amount-R $2000 Growth rate of deposit-g-4% Number of periods-n 39 years (At the end of 40 years he starts removing the money, hence 39 deposits only) We know that future value of growing (by fixed percentage) annuity is given by FV=62000% .[1+6,--(1+4%] 6%-4% FV 2000 * 50 * 5.087141 FV $508714.15 Now FV is equivalent to worth (P) of future 20 uniform equal drawings P=Worth of 20 annual uniform drawings-$508714.15 We know that (I (I (1+6%) 39 (P/A,6%,20)= - 114699.2 6% Also (A/P,6%,20)=1/P(P/A,6%,20)=1/11 .46992-0.0871 85 Annual drawing P*(A/P,6%,20) 508714.15*0.087185 $44352.24](http://img.homeworklib.com/questions/468ad3b0-789c-11ea-85c9-d19a8dbd026b.png?x-oss-process=image/resize,w_560)
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