A) | FV of savings for the 1st 10 year period = 500*(1.005^120-1)*1.005^240/0.005 = | $ 2,71,237 |
FV of savings for the 2nd 10 year period = 1000*(1.005^120-1)*1.005^120/0.005 = | $ 2,98,162 | |
FV of savings for the 3rd 10 year period = 2000*(1.005^120-1)/0.005 = | $ 3,27,759 | |
Amount available on the 60th birthday = | $ 8,97,157 | |
B) | The above amount is the PV of the monthly withdrawals to be made. Using the formula for finding annuity given PV of the annuity, the monthly withdrawals = | |
= 897157*0.005*1.005^360/(1.005^360-1) = | $ 5,379 |
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