Answer:
Springfield mogul, Montgomery Burns
How large of an annual deposit must be made to fund Mr. Burns retirement plans:
= $94,644,751.67
Explanation:
a) Data and Calculations:
Age of Mr. Burns now = 80 years
Retirement age = 100 years
Annual withdrawal at the beginning of each year for 10 years = $500 million
Special offshore account pays interest = 18% annually
Investment for funding retirement:
Deposits = 20 equal end-of-the year deposits in the same special offshore account above.
b) Calculation of Future value of annual deposit after 20 years:
FV (Future Value) $13,877,572,093.01
PV (Present Value) $2,651,510,914.01
N (Number of Periods) 10.000
I/Y (Interest Rate) 18.000%
PMT (Periodic Payment) $500,000,000.00
Starting Investment $0.00
Total Principal $5,000,000,000.00
Total Interest $8,877,572,093.01
c) Calculation of Annual Deposit to reach the future value target of $13,833,567,810.87:
FV (Future Value) $13,877,567,810.87
PV (Present Value) $506,609,362.98
N (Number of Periods) 20.000
I/Y (Interest Rate) 18.000%
PMT (Periodic Payment) $94,644,751.67
Starting Investment $0.00
Total Principal $1,892,895,033.42
Total Interest $11,984,672,777.45
d) Mr. Burns will need to contribute $94,644,751.67 at the end of each period to reach the future value of $13,877,572,093.01. Both the future value of deposits of $13,877,567,810.87 and the annual periodic payment of $94,644,751.67 are determined using online financial calculator.
