Question

1.) The life expectancy table estimates that Luke will live to be 90 years old, and he plans to work until his 70th birthday. In retirement he will need $4500 a month for 20 years. His current investment pays 4.52% interest compounded monthly. How much must he have (Present Value) on his day of retirement at age 70?

2.) 1. Find the maturity value if you deposit $6500 monthly for 10 years in an annuity paying 4.58% compounded monthly

Answer 1

1)monthly rate = 4.52/12 = .37667%

number of months = 20 *12 =240

present value at time of retirement = PVA .37667%,240 * Amount

                    = 157.7955*4500

                   =710079.79

**find present value annuity factor usinf financial calculator where ,PMT = 1,n=240 ,i=.37667% press PV

2)

Monthly rate = 4.58 /12= .38167%

number of months = 10*12 =120

Maturity value = FVA .38167%,120 *A

            = 151.84260*6500

             =986976.92

**FIND future value annuity factor using financial calculator