Answer:
Annual deposit= 13,346.55
Explanation:
Giving the following information:
Exactly one year after the day he turns 75.0 when he fully retires, he will begin to make annual withdrawals of $129,100.00 from his retirement account until he turns 94.00. After this final withdrawal, he wants $1.85 million remaining in his account.
He will make contributions to his retirement account from his 26th birthday to his 65th birthday.
Assume an 8.00% interest rate.
First, we need to calculate the amount of money needed at 65.
39 years*129,100 + 1,850,000= $6,884,900
We need to calculate the value at 65:
PV= 6,884,900/(1.08^10)= $3,189,040.85
We need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (3,189,040.85*0.08)/[(1.08^39)-1]= $13,346.55
