Question 16 (1 point) You would like to retire in 15 years. Starting in 15 years...

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Question

Answer 1

Answer #1

Step 1 :	Present value of withdrawal $2000 at starting of year 15
	Present Value Of An Annuity Due
	=C + C*[1-(1+i)^-(n-1)]/i]

	Where,
	C= Cash Flow per period
	i = interest rate per period =12%/12 =1%
	n=number of period =180

	= $2000+2000[ 1-(1+0.01)^-(180-1) /0.01]

	= $2000+2000[ 1-(1.01)^-179 /0.01]

	= $2000+2000[ (0.8315) ] /0.01

	= $168309.76

Step 2 :	Calculation of size of deposit

	Future Value of an Annuity Due
	= C[(1+i)^n-1]/i] (1+i)

	Where,
	c= Cash Flow per period
	i = interest rate per period
	n=number of period

	168309.76= C[ (1+0.01)^180 -1 /0.01] * (1 +0.01)

	168309.76= C[ (1.01)^180 -1 /0.01] * 1.01

	168309.76= C[ (5.9958 -1 /0.01] * 1.01

	C =$333.57

	Monthly deposit = $333.57

Answer 2

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