Ben and Donna determine that upon retirement, they will need to withdraw $50,000 annually at the end of each year for the next thirty years. They know that they can earn 4% each year on their investment. What is the present value of this annuity? In other words, how much will Ben and Donna need in their retirement account (at the beginning of their retirement) to generate this future cash flow?
Please explain, your work. Thank you
We have to use financial calculator to solve this problem | ||||
Put in calculator - | ||||
FV | 0 | |||
PMT | -50000 | |||
I | 4% | |||
N | 30 | |||
compute PV | $864,601.67 | |||
Therefore present value= | $864,601.67 |
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