Question

You plan to retire at age 40 after a highly successful but short career. You would like to accumulate enough money by age 40 to withdraw $227,000 per year for 40 years. You plan to pay into your account 15 equal installments beginning when you are 25 and ending when you are 39. Your account bears interest of 10 percent per year.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Future Value and Present Value Tables 121 Futre ot a Srle d 4702727075002 778 Table I 1 11 Pret Ve erk RS


Required:

1. How much do you need to accumulate in your account by the time you retire? (Round your final answer to the nearest dollar amount.)

2. How much do you need to pay into your account in each of the 15 equal installments? (Round your final answer to 2 decimal places.)

Answer 1

Answer 1

Annual amount to be received after retirement	227000
No. of Years	40
Discouting Rate	10%
PVIFA @ 10% for 40 Years	9.779
Amount needed to be accumulated at the time of retirement (PV of all annual benefits)	22,19,833.00

Answer 2

Future value of annuity investments	22,19,833.00
Future value of $ 1 annuity @10% for 15 years	31.77
Annual Savings in account	69,865.39