Question

After graduating from college with a bachelor of business administration, you begin an ambitious plan to retire in 24.00 years. To build up your retirement fund, you will make quarterly payments into a mutual fund that on average will pay 12.80% APR compounded quarterly. To get you started, a relative gives you a graduation gift of $3,531.00.

Once retired, you plan on moving your investment to a money market fund that will pay 6.24% APR with monthly compounding. As a young retiree, you believe you will live for 33.00 more years and will make monthly withdrawals of $10,753.00. (YOUR WITHDRAWALS ARE AT THE BEGINNING OF THE MONTH!!!!) To meet your retirement needs, what quarterly payment should you make?

Answer 1

1]	Amount to be drawn after retirement is an
	annuity due.
	The amount to be in the fund at the time of
	retirement is the PV of that annuity due.
	PV = 10753*1.0052*(1.0052^396-1)/(0.0052*1.0052^396) =	$ 1,812,076.54
2]	FV of the amount in hand = 3531*1.032^96 =	$         72,635.45
3]	Balance to be accumulated through quarterly deposits = 1812076.54-72635.45 =	$ 1,739,441.08
4]	The amount at [3] is the FV of the quarterly deposits
	to be made.
	The required quarterly deposit = 1739441.08*0.032/(1.032^96-1) =	$ 2,844.14