Question

(1 point) A person wants to establish an annuity for retirement. He wants to make quarterly deposits for 3535 years so that he can then make quarterly withdraws of $14,500.00$14,500.00 for 2020 years. The annuity earns 7.587.58% compounded quarterly.

(a) How much will have to be in the account at the time he retires?

Value of account at retirement:

[Note: Your answer is a dollar amount and should have a dollar sign and exactly two decimal places.]

(b) How much should be deposited each quarter for 3535 years in order to accumulate the required amount?

quarterly deposit:

[Note: Your answer is a dollar amount and should have a dollar sign and exactly two decimal places.]

(c) What is the total amount of interest earned during the 5555-year period?

Total Interest Earned:

[Note: Your answer is a dollar amount and should have a dollar sign and exactly two decimal places.]

Answer 1

A: Using financial calculator

Input:

N= 20*4 = 80

PMT = -14500

I/Y = 7.58/4= 1.895

Solve for PV as 594,748.23

Amount required to be in the account = $594,748.23

B: Using financial calculator

Input:

N= 35*4 = 140

I/Y = 7.58/4= 1.895

FV = 594,748.23

Solve for PMT as -877.18

Hence the quarterly deposits have to be $877.18

C: Interest earned in the 20 year period = 14500*80 – 594748.23=565251.77

Interest earned in 35 year period = 594748.23- 877.18*140= 471943.03

Total interest = $1037194.8