Owen Freeman wishes to have $800,000 in a retirement fund 20 years from now. He

Question

Owen Freeman wishes to have $800,000 in a retirement fund 20 years from now. He can create the retirement fund by making a single lump-sum deposit today.

a. If upon retirement in 20 years, Owen plans to invest $800,000 in a fund that earns 4 percent, what is the maximum annual withdrawal he can make over the following 15 years?

b. How much would Owen need to have on deposit at retirement in order to withdraw $35,000 annually over the 15 years if the retirement fund earns 4 percent?

c. To achieve his annual withdrawal goal of $35,000 calculated in part b, how much more than the amount calculated in part a must Owen deposit today in an investment earning 4 percent annual interest?

Explanation / Answer

1. =PMT(4%,15,800000)=71953

2. =PV(4%,15,35000)=389144

3. =PV(4%,20,0,389144)=177600

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.