Barry Cuda has estimated that he will live for 25 years after heretires at age...

Barry Cuda has estimated that he will live for 25 years after he retires at age 67. He would like to be able to withdraw $90,000 annually from his retirement account for those 25 years assuming his account during retirement earns 6% annual interest. If Barry has 20 years until he retires, how much will he need to save annually at 9% to reach his goal?

Group of answer choices

$21,679

$22,488

$44,643

$25,891

Solutions

Expert Solution

Present Value required at the retirement =

where r is the rate of Return for compounding period = 0.06

n is the no of compounding period = 25

= 1,150,502.05435

Now this 1,150,502.05435 value is required after 25. this will become the Future as on today.

So,

Future Value of Annuity =

r = 0.09

n = 20

1,150,502.05435 =

1,150,502.05435 = Periodic Payment * 51.1601196404

Periodic Payment = 1,150,502.05435 / 51.1601196404

Periodic Payment = 22488.26

jeff jeffy answered 2 years ago

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