Question

Steve weatherspoon, a super salesman contemplating retirement on his 50th birthday, decides to create a fund on an 11% basis that will enable him to withdraw 14,570 per year on June 30th, beginning in 2024 and continuing through 2027. To develop this fund, Steven intends to make equal contributions on June 30th of each of the years 2020 through 2023. How much must the balance of the fund equal on June 30th 2023 in order for Steve to satisfy his objective?

Answer 1

Based on the amount that Steve Weatherspoon wants to withdraw every year beginning in June 30, 2024, and the interest rate, the balance on June 30th 2023 should be $45,203.

What should the balance be in 2023?

The fact that Steve Weatherspoon wants to be able to withdraw a particular amount every year, this makes this amount an annuity.

The value in 2023 would therefore be the present value of the annuity that will then accrue to the required amounts as the years go by.

The present value of an annuity is:

= Annuity amount per year  x Present value interest factor of an annuity, 11%, 3 years between 2024 and 2027

Solving gives:

= 13,126.25 x 3.44371

= $45,203

In conclusion, the balance on the fund in 2023 should be $45,203 in order for Steve Weatherspoon to achieve his objectives.

Find out more on the present value of an annuity at brainly.com/question/25792915

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