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.)

Answer 1

Computation of future value at 30th year
put in calculator
PV		25000
PMT		12000
I		8%
N		30
Compute FV	($1,610,964.96)
FV =		$1,610,964.96
Now we have to compute the annual payment for 25 year
put in calculator
FV			0
PV			($1,610,964.96)
I			8%
N			25
Compute PMT		$150,913.23
Answer =			$150,913.23