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Springfield Mogul Montgomery Burns, age 75, wants to retire at age 90 so he can steal...

Springfield Mogul Montgomery Burns, age 75, wants to retire at age 90 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to withdraw 600 MM at the beginning of each year for 20 years from a special off-shore account that will pay 21% annually. In order to fund his retirement, Mr. Burns will make 150MM deposit today plus 15 equal end of year deposits in the same special account that will pay 21% annually. How large of an annual deposit must be made to fund Mr. Burns retirement plans?

Solutions

Expert Solution

First we determine the amount needed on retirement
N 20
Annual withdrawal 600000000
Rate 21%
Amount needed on retirement at age 90 $3,380,757,534.10
Now we compute the annual deposits
N 15
Rate 21.00%
Future value of amount needed at age 90 $3,380,757,534.10
PV of deposit 150000000
Savings required each year ($9,745,211.90)

WORKINGS in Excel

jeff jeffy answered 1 year ago
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