Question

You decided to start with individual savings and save a fixed amount annually, for 20 years, in a high-interest account that guarantees 3% return per year.

c) How much do you need to have in your account to be able to withdraw $ 50 000 every year for 10 years? First withdrawal every year after the last payment.

d) How much did you have to save in the 20 years?

Answer 1

c]	The amount to be had in the account = PV of the
	annuity of $50000 for 10 years discounted at 3%.
	Amount to be had = 50000*(1.03^10-1)/(0.03*1.03^10) =	$ 4,26,510.14
d]	The above amount is the FV of the annual savings to be
	made for 20 years.
	So, 426510.14 = A*(1.03^20-1)/0.03
	where A = savings to be made annually for 20 years
	A = 426510.14*0.03/(1.03^20-1) =	$         15,872.88