You would like to have an annual $50,000 income generated from your retirement f
ID: 1230457 • Letter: Y
Question
You would like to have an annual $50,000 income generated from your retirement fund one year after your 65-year-old birthday for 20 years You start saving at exactly 25 years old (now) and you decided to start a retirement fund investment to reach that goal one year from now and maek your last deposit on your 65 year old birthday. Assume the annual interest rate at 8% per year and the investments and withdrawals of funds are made at the end of each year. How much money you will needin this account right after your last deposit?_____How much do u have to invest each year to reach your goal?_____
i know the first answer is around $490,905 thousand and the second in around $1,895 i just dont know how they got that
Explanation / Answer
In order to get the first answer, first consider the last 20 years: n = 20 pmt = -50,000 future value = 0 i/r = 8% use finance calculator, compute for PV, the present value at year 65 It'll give you 490,907.37704... which is the total amount of money you have in the bank before you start making withdrawal this PV is also the Future Value for investment from yr 20 to yr 65, hence, to calculate for the second one: n = 40 FV = 490,907.37704 I/r - 8% PV = 0 (because currently you don't have any money in the bank) Compute for PMT using finance calculator PMT = 1,894.9818... = 1,895 approx. hope that helps! :)
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