Question

How much must you deposit each year into your retirement account starting now and continuing through...

How much must you deposit each year into your retirement account starting now and continuing through year 10 if you want to be able to withdraw $90,000 per year forever, beginning 32 years from now? Assume the account earns interest at 12% per year.

The amount to be deposited is determined to be $

Homework Answers

Answer #1

Present Value at year 31 = Annual Cash Flow / Rate of Interest

where r is the rate of Return for compounding period = 12%

= 90,000 / 0.12

= 750,000

Present Value at years 10 = 750,000 / (1+r)^n

r = 0.12

n = 22

= 750,000 / (1+0.12)^22

= 61981.8827925

Future Value of Annuity Due =

r = 0.12

n = 10

61981.8827925 =

61981.8827925 = Periodic Payment * 19.6545832776

Periodic Payment = 61981.8827925 / 19.6545832776

Periodic Payment = 3153.56

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