Question

Today is Joan's 30th birthday. Assume that she deposits $3,400 today and $3,400 on each of her birthdays until she turns 60 (when she makes the last deposit) into an account earning 6%. She plans to withdraw equal amounts each year from the time she turns 65 until she is 80. Each withdrawal is $______.

Please show financial calculator key strokes!

Answer is 36, 019.03

Answer 1

Till she is 60, she is making deposits and she begins now so it is a beginning annuity, so first we find out the value of that:

We are given the following information:

PMT	3400
r	6.00%
n	30
frequency	1

We need to solve the following equation to arrive at the required PV

So She will have $284925.70 when she is 60

Now this will compound for 5 more years till she is 65 years old, so it will become:

Now we have to find the annual PMT she can make for the upcoming 15 years.

We are given the following information:

r	6.00%
n	15
frequency	1
PV	$        3,81,294.86

We need to solve the following equation to arrive at the required PV

So the monthly PMT is 39259.17