Hanna is 40 years old today and is beginning to plan for retirement. She wants t

Question

Hanna is 40 years old today and is beginning to plan for retirement. She wants to set aside an equal amount at the end of each of the next 25 years so that she can retire at age 65. She expects to live to the maximum age of 85 and wants to be able to withdraw $25,000 per year from the account on his 66st through 85th birthdays. The account is expected to earn 10 percent per annum for the entire period of time. Determine the size of the annual deposits that must be made by Hanna.

Explanation / Answer

Now first we will have to calculat the amount required at retirement

This will be equal to present value of all cashflows

PV(10%,20,-25000,0,0)

=212839.09

Now we will calculate the amount to be invested for 25 years to get this amount

PMT(0.1,25,0,-212839.1,0)

=$2164

Hence C is the answer

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