Question about future value of an annuity?
You have a 40 year old client, who wants to start saving for retirement, with her first payment coming one year from now. She can save $5,000 per year, and expect an average return of 9% in the future. A.) How much money will she have at 65? B.) How much money will she have at 70? C.) If she expects to live for 20 years in retirement if she retires at 65 and for 15 years at 70, and her investment continues to earn the same rate, how much could she withdraw at the end of each year after retirement at each retirement age? 3.)A.) For this problem, I plugged in the following values into the financial calculator application: N = 25, I = 9%, PV = 0, PMT = -5,000. The variable to be solved in this case is the future value. The answer I got was $423,504.48. B.) For this problem, the only value I switched was N = 25, to N = 30. The answer I got was $681,537.69. C.) At 65 years old, the client could withdraw $46,393.42 each year during retirement, for 20 years. I arrived at my answer by inputting the following values into the financial calculator application: N = 20, PV = -423,504.48, I = 9%, and FV = 0. The value to be solved for is the payment, or the withdrawals she would be able to make at the end of each year. At 70 years old, the client could withdraw $84,550.80 for 15 years. I arrived at my answer by inputting the following values into the financial calculator application: N = 15, I = 9%, PV = -681,537.69 and FV = 0. And again, the value to be solved for is the payment, or the withdrawals she would be able to make at the end of the year. ^ Those are the answers I got. Can anyone just check them over and make sure I did the problem correctly? Thanks.
Public Comments
- you get an A
