Question

Question 18 (3.5 points) You plan to retire 33 years from now. You expect that you will live 29 years after retiring. You want to have enough money upon reaching retirement age to withdraw $150,000 from the account at the beginning of each year you expect to live, and yet still have $2,300,000 left in the account at the time of your expected death (62 years from now). You plan to accumulate the retirement fund by making equal annual deposits at the end of each year for the next 33 years. You expect that you will be able to earn 11% per year on your deposits. However, you only expect to earn 6% per year on your investment after you retire since you will choose to place the money in less risky investments. What equal annual deposits must you make each year to reach your retirement goal? $8,453.53 $9,383.42 $7.842.81 $7,065.60 $10,597.07

Answer 1

Function Arguments ? X PV 69 Rate Nper 29 Pmt 150000 Fv2300000 Type 11 = 0.06 = 29 = 150000 1 1 1 1 = 2300000 = 1 = -2585405.141 Returns the present value of an investment: the total amount that a series of future payments is worth now. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = -$2,585,405.14 Help on this function OK Cancel

Amount required on retirement date $2,585,405.14

Function Arguments ? x PMT 1 1 = 0.11 = 33 Rate 11% Nper 33 Pv0 FV -2585405.14 Type = -2585405.14 1 1 = number = 9383.415372 Calculates the payment for a loan based on constant payments and a constant interest rate. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $9,383.42 Help on this function D OK Cancel

Hence, Deposit in each year was $9,383.42

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