Homework Answers
Answer.
Eman wants to have $15,000 per year after retirement until she
turns 80
Discount rate = 12%
Desired sum at retirement = Present Value of Withdrawals
Desired sum at retirement = $15,000/1.12 + $15,000/1.12^2 + … +
$15,000/1.12^20
Desired sum at retirement = $15,000 * (1 - (1/1.12)^20) /
0.12
Desired sum at retirement = $15,000 * 7.46944
Desired sum at retirement = $112,041.60
Eman wants to have $112,041.60 at retirement so that she can
withdraw $15,000 per year
Discount Rate = 12%
Annual Saving * FVIFA(12%, 40) = $112,041.60
Annual Saving * (1.12^40 - 1) / 0.12 = $112,041.60
Annual Saving * 767.09142 = $112,041.60
Annual Saving = $146.06
So, Eman has to save $146.06 per year
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