Present value and future value computations. (Tables needed.) John Rich, an exec

Question

Present value and future value computations. (Tables needed.)
John Rich, an executive VP contemplating retirement on his sixty fifth birthday, decides to create a fund
on a 6% basis that will enable him to withdraw $90,000 per year on July 31, beginning in 2022 and
continuing through 2026. To develop this fund, Rich intends to make equal contributions on July 31 of
each of the years 2017–2021.
Instructions
(a) Compute how much the balance of the fund must equal on July 31, 2021, in order for Rich to satisfy
his objective.
(b) Compute the amount of Rich's contributions to the fund.

Explanation / Answer

a.) PVAF for 5 year (from 2022 to 2026) @6% is 4.21

Required amount every year is 90000 post retirement.

Multiplying 90000 with 4.21 we get $ 379,112.74

Thus fund must have a balance of $ 379,112.74 on 31July,2021

b.) FVIFA for Years (2017 to 2021) at 6% interest is 5.9753

Dividing $379,112.74 with 5.9753 is $63,446.45

This much he has to invest each year

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