Question

3. You deposit $12,000 annually into a life insurance fund for the next 30 years, after which time you plan to retire. (LG 15-2)

   1. If the deposits are made at the beginning of the year and earn an interest rate of 7 percent, what will be the

      amount of retirement funds at the end of year 30?

   2. Instead of a lump sum, you wish to receive annuities for the next 20 years (years 31 through 50). What is the constant annual payment you expect to receive at the beginning of each year if you assume an interest rate of

      7 percent during the distribution period?

   3. Repeat parts (a) and (b) assuming earning rates of

      6 percent and 8 percent during the deposit period and earning rates of 6 percent and 8 percent during the dis- tribution period. During which period does the change in the earning rate have the greatest impact?

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

C w ENG 10:15 30-07-2020 99+ 33 Х BT267 . BS BT BU BV BW BX BY BZ CA CB C- 267 268 269 270 271 272 273 274 275 276 277 12000 CASE OF ANNUITY DUE PMT YEARS RATE 30 7.00% a FUTURE VALUE 1212876.50 [=FV(BV274,8V273,-BV272,1)] RETIREMENT SAVINGS THIS AMOUNT SHOULD BE AVAILABLE ON RETIREMENT 1212876.50 278 279 280 281 282 283 284 285 286 287 288 PRESENT VALUE YEARS RATE ANNUAL PAYMENT 20 7.00% 106997.16 (=PMT(BV283,BV282,-BV281,,1)] b PMT 12000 30 DEPOSIT PERIOD DISTRIBUTION PERIOD 20 289 290 C DEPOSIT PERIOD VALUE AT 10 YEARS DISTRIBUTION PERIOD ANNUAL PAYMENT 02 en PM, PMT loan with points LOCK BOX DILUTION DOLLAR COST AVG EXPO NPER APR CPI ear FVA s2 pva MISCL s3 STATE 56 57 58 S...

10:16 C w ? ENG 99+ 30-07-2020 33 Х BT301 . BS BT BU BV BW BX BY BZ CA CB C- 289 DEPOSIT PERIOD 6% VALUE AT 10 YEARS DISTRIBUTION PERIOD 1005620.13 6% [=FV(BS291,BV287,-BV286,,1)] 8% ANNUAL PAYMENT 82711.84 (=PMT(BV291,BV288,-BU291,,1)] 94837.62 (=PMT(BV292,BV288,-BU291,,1)] 8% 6% 1468150.42 [=FV(BS294,BV287,-BV286,,1)] 290 c 291 292 293 294 295 296 297 298 299 300 301 120754.76 (=PMT(BV294,BV288,-BU294,1)] 138457.74 (=PMT(BV295,BV288,-BU294,,1)] 8% THE IMPACT WILL BE HIGHEST WHEN DEPOSIT RATE WAS 8% AND DISTRIBUTION PERIOD = 8% BECAUSE RATE IS HIGHER IN BOTH CASES, SO IT WILL MULTIPLICATIVE EFFECT 302 303 304 305 306 307 308 309 310 311 312 PM, PMT loan with points LOCK BOX DILUTION DOLLAR COST AVG EXPO NPER APR CPI ear FVA s2 pva MISCL s3 STATE S6 s7 58 S ...