Hi! Please help me with this problem I got stuck and have been trying to figure

ID: 2805236 • Letter: H

Question

Hi! Please help me with this problem I got stuck and have been trying to figure it out but I kept getting wrong answers. Thank you so much!

You just turned 25. You want to save equal amount of money every

year for the next 40 years so that by the time you are 65 you will have accumulated enough

money that you can withdraw $60,000 a year for the next 25 years. (You make your first deposit

a year from now and your last one at age 65. You take your first withdrawal when you are 66

years old and the last when you are 90.) How much do you have to save each of the first 40

years? Assume i=8%.

Value of withdraws = PMT*(1-(1+r)-n)/r

Value = 60000*(1-(1+8%)-25) / 8% = 640486.57

Now with 40 equal installments we need to accumulate 640486.57

PMT = FV * r / ((1+r)n - 1)

PMT = 640486.57* 8% / ((1+8%)40 - 1) = 2472.38

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