You wish to retire in 20 years, at which time you want to have accumulated enoug

Question

You wish to retire in 20 years, at which time you want to have accumulated enough money to receive an annual annuity of $19,000 for 25 years after retirement. During the period before retirement you can earn 10 percent annually, while after retirement you can earn 12 percent on your money What annual contributions to the retirement fund will allow you to receive the $19,000 final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual contribution

Explanation / Answer

using the PVof Annuity Factor Table..For N=25 years and rate of 12%, we get presenet value of annuitty at the end of 20 years=7.84*19000=149019.64

Using the FV of annuity facto rable for N=20 years and rate of 10%, we get 149109.64/57.27=2601.83

Annual contribution required=$2601.83

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