Answer:
The annual payments are= $10586.40
Explanation:
Giving the following information:
By the end of this year, you would be 35 years old and you want to plan for your retirement.
You wish to retire at the age of 65 and you expect to live 20 years more.
You wish to have an annual sum of $50,000.
A conservative bond fund has been returning 7% annually.
First, we need to calculate the amount of money needed at 65 years old.
50000*20= $1,000,000
So, we know the final value= 1,000,000; n=30 and the interest rate i=0.07
We need to find the annual payments required to achieve the final value, using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual payment
Isolating A:
A= (FV*i)/[(1+i)^n-1]
A= (1000000*0.07)/[(1.07^30)-1]
A=$10586.40
