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Deffense [45]
3 years ago
5

Your grandparents are talking about their retirement in a year. They told you that they should have enough in their retirement f

unds to pull $50,000 a year for 20 years, starting one year from today. If the discount rate is 5 percent, how much should they have in their retirement account now? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)
Business
1 answer:
Afina-wow [57]3 years ago
3 0

Answer:

Present value of annuity = 623,110.5  

Explanation:

To determine present value of annuity of $50,000.

Annuity is fixed series of cash flows for a definite time period.

present value of money at the time retirement is

Present value of annuity =Annuity * \frac{[1 - \frac{1 }{( 1 + r)^{n}}]}{r}

where,

n of year of payment left to receive

r =rate of interest

Present value of annuity =50,000 \times \frac{[ 1 - \frac{1}{( 1 + 0.05)^{20}}]}{0.05}

Present value of annuity = 50,000 * 12.46221

Present value of annuity = 623,110.5  

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