Question

An investor has $25,000 that he can invest today. In addition to this amount, he can also invest $12,000 per year for 30 years (beginning one year from now) at which time he will retire. He plans on living for 25 years after he retires. If interest rates are 8 percent, what size annual annuity payment can he obtain for his retirement years? (All annuity payments are at year-end. Round your answer to the nearest dollar.)

PLEASE show in excel

Answer 1

1]	FV of amount in hand = 25000*1.08^30 =	$       251,566
2]	FV of the 30 annual deposits [annuity] = 12000*(1.08^30-1)/0.08 =	$ 1,359,399
	Total amount at the end of 30 years	$ 1,610,965
3]	The above amount is the PV of the annuity for 25 years.
	So, 1610965 = A*(1.08^25-1)/(0.08*1.08^25), where A is the size of
	the annuity.
	So, the annual annuity = 1610965*0.08*1.08^25/(1.08^25-1) =	$       150,913