Question

Upon retirement, you hope to earn a yearly income of $48,955.24. The interest rate you will earn on your investments is 12.84%, and you expect to live for 27
years after retirement. How much must you have invested at the beginning of retirement so you achieve your target income and it lasts as long as you live?

Answer=?

Cash flow=?

r=?

n=?

Answer 1

- Periodic Yearly Income required after retirement = $48,955.24

Calculating the Present Value of these Yearly Income at retirement using PV of ordinary annuity formula:-

Where, C= CashFlow = Periodic Yearly Income = $48,955.24

r = Periodic Interest rate = 12.84%

n= no of periods = 27 years

Present Value = $366,658.62

So, amount you need to invest at the beginning of retirement is $366,658.62

Answer= $366,658.82

Cash flow= $48,955.24

r= 0.1284

n=27

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