Question

Macon would like to begin planning for retirement. He has as of his 60th birthday collected $150,000 which he plans to deposit in a bank account earning 4.5% per year compounded yearly. Macon is also willing to begin saving an amount on his 61st birthday, and increase that amount by 3.5% every year. He would like to avail $45,000 on his 70th birthday and keep getting an amount greater than that by 6% every year till his 75th birthday. How much money should he deposited on his 61st birthday?

Group of answer choices

$3,645

$3,951

$3,842

$7,279

Answer 1

Cash inflow expected
Age	70	71	72	73	74	75
Cash value	45000.00	47700.00	50562.00	53595.72	56811.46	60220.15
PV @ 4.5%	279876.44
To accumulate this corpus, Macon has already deposited 150,000 which would amount to
Value of 150K in 10 years	232945.41
Additional amount required	46931.03
Age	Deposit amount	Value at 70
61	3645.36	5417.36	(Using Goal seek in excel)
62	3772.95	5365.52
63	3905.00	5314.17
64	4041.68	5263.32
65	4183.14	5212.95
66	4329.55	5163.07
67	4481.08	5113.66
68	4637.92	5064.73
69	4800.25	5016.26
	Total	46931.03
So correct answer is $3645