You wish to retire in 10 years, at which time you want to have accumulated enoug

Question

You wish to retire in 10 years, at which time you want to have accumulated enough money to receive an annual annuity of $13,000 for 15 years after retirement. During the period before retirement you can earn 9 percent annually, while after retirement you can earn 11 percent on your money.

What annual contributions to the retirement fund will allow you to receive the $13,000 annuity? UseAppendix C and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

You wish to retire in 10 years, at which time you want to have accumulated enough money to receive an annual annuity of $13,000 for 15 years after retirement. During the period before retirement you can earn 9 percent annually, while after retirement you can earn 11 percent on your money.

Explanation / Answer

using formuale:

use pv and pmt formuale in excel to find the answer

use pv to find the amount to be accumulated before start of the retirement

=pv(rate,nper,pmt,fv,type)

=PV(11%,15,130000,,0)=$934,813.04

for annual contribution use pmt formuale in excel

=pmt(rate,nper,pv,fv,type)

=PMT(9%,10,,934,813.04,0)

=$61,529.48

use the same formuale in financial calculator as well

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