10. Upon graduating from college 35 years ago , Dr . Nick Riviera was already th
ID: 2764775 • Letter: 1
Question
10. Upon graduating from college 35 years ago , Dr . Nick Riviera was already thinking of retirement . Since then he has made deposits into his final payment and is at last ready to retire. Additionally , an uncle died 15 years ago and Nick received a check of $20,000 at that time. He deposited the entire amount into his retirement fund.
If Nick expects to live for 20 more years , how much will his quarterly income be during his retirement ? His retirement fund has earned 9% compounded quarterly . This rate of return is expected to continue.
Explanation / Answer
Calculation of future value of $20000 after 15 years
FV=PV(1+r)^n
PV=20000,r=0.09/4=0.0225,n=15*4=60
FV=20000*(1+0.0225)^60
FV(value today) =$76002.70
PMT = P X r x (1+r)^n / ((1+r)^n - 1)
PMT=quarterly income, P = Principal=76002.70 , r = interest rate=0.09/4=0.0225, n=number of payment =20*4=80
= 76002.70 x0.0225 x (1+0.0225)^80/((1+.0225)^80 – 1)
Quarterly income = $2056.92
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