Answer to Question #300780 in Finance for Nardi

Question

Marcus has a pension plan with an annuity that is guaranteed to earn 13% interest compounded semi-annually. He plans to work for 10 years before retiring and would then like to be able to draw an income of $110,000.00 per annum for 18 years. How much should he deposit annually into his retirement fund to accomplish this?

Answer 1

PV=110 000

n=36 ( 18*2)

r=0.065

the current (present) value of an ordinary annuity

$PV=A(\frac{1-\frac{1}{(1+r)^n}}{r})$

$110 000=A(\frac{1-\frac{1}{(1+0.065)^{36}}}{0.065})$

A (0.5)=7976.47

A(year)=15952.93