Question

Derek decides that he needs $166,575.00 per year in retirement to cover his living expenses. Therefore, he wants to withdraw $166575.0 on each birthday from his 66th to his 87.00th. How much will he need in his retirement account on his 65th birthday? Assume a interest rate of 10.00%.

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Answer format: Currency: Round to: 2 decimal places.

Answer 1

Solution

Present value of annuity =Annuity payment*((1-(1/(1+i)^m))/i)

where

i-discount or intrest rate per period-10%

m-number of periods -22

Present value of annuity =?

Annuity payment =166575

Putting values in formula

Present value of annuity at the time of retirement=166575*((1-(1/(1+.1)^22))/.1)

Present value of annuity =$1461119.32 (Amount he must have in retirement account on his 65th birthdays)

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