Question

currently 27 yrs old to retire at 65 but not start working until after school in 2 yrs out making $60,000 with 7 yearly increase until 65. spending $21,000 in yr 1 and $23,000 in year 2 then begin making the $60,000. what is present value with her degree in 2 yrs?

Answer 1

Current age = 27 yrs

Will start working and earning $60,000 (PMT) with 7%(I/Y) interest two years from today, hence the age to start earning is 27+2 = 29yrs

Will earn till 65 yrs of age.

Hence number of years (N)for earning $60,000 a year = 65-29 = 36yrs.

The present value of the earnings for 36 yrs @ $60,000 a year:

It can be calculated simply by using a financial calculator.

Feed the following info:;

PMT = 60000

FV = 0

I/Y = 7%

N = 36 yrs

CPT -> PV = $782,112.465 (ignore the -ve sign)

The present Value in two years from now is $782,112.465