In: Finance
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
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 | ||||||