Answer:
$65,742.60
Explanation:
Note: The full question is <em>"Peter wishes to create a retirement fund from which he can draw $20,000 when he retires and the same amount at each anniversary of his retirement for 10 years. He plans to retire 20 years from now. What investment need he make today if he can get a return of 5% per year, com- pounded annually?"</em>
At first, we need to find the PV of withdrawals and there are 11 withdrawals starting 20 years from now.
PV = PMT/r * 1 - 1/(1+r)^n. This formula gives the PV one period before the first withdrawal. That is 19 years from now because the first withdrawal is 20 years from now.
PMT = 20,000, n = 11,
r = 0.05
PV19 = 20,000/0.05 * [1 - 1/(1+0.05)^11]
PV19 = 400,000 * 0.4153207109
PV19 = 166,128.28436
Now, we need to discount this back to toda
PV0 = PV19/(1 + r)^n; n = 19, r = 0.05
PV0 = 166,128.28436/(1 + 0.05)^1
PV0 = $65,742.6033421702
PV0 = $65,742.60
So, Peter needs to make $65,742.60 today.
Take the spread to their advantage to get more mainstream and known
You can sell it later. if you lease, you are paying money for someone else's car. say you can buy a car for 20thousand or lease for 1000 per month. after 20months, you would have paid the exact same amount, except if you bought the car, you now have an asset tht can be sold.
Answer:
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