Question

You deposit $11,000 annually into a life insurance fund for the next 13 years, after which time you plan to retire.

a.	If the deposits are made at the beginning of the year and earn an interest rate of 6 percent, what will be the amount in the retirement fund at the end of year 13? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Future value

$

b.

Instead of a lump sum, you wish to receive annuities for the next 26 years (years 14 through 39). What is the constant annual payment you expect to receive at the beginning of each year if you assume an interest rate of 6 percent during the distribution period? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Annual payment

$

c.	Repeat parts (a) and (b) above assuming earning rates of 5 percent and 7 percent during the deposit period and earning rates of 5 percent and 7 percent during the distribution period. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Deposit Period	Value at 13 Years	Distribution Period	Annual payment
5 percent	$	5 percent	$
		7 percent	$
7 percent	$	5 percent	$
		7 percent	$

Answer 1

We are supposed to solve first question in case question demands detailed calculation:

Solution for > a.

a.

PMT = Payment =	$11,000.00
N = Period = 13 years x 12 months =	156
R = Rate = 6%/ 12months = 6%/12 = 0.5%	0.50%
Future value formula for investment done beginning of period:
FV = (PMT x ((1+R)^N-1)/R) x (1+R)
Future Value =11000*((1+0.5%)^156-1)/(0.5%)*(1+0.5%) =	$2,602,870.21

Amount in retirement fund at end of the year 13 > $2,602,870.21