Question

Exercise 6-8 Morgan Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 9% basis that will enable him to withdraw $16,000 per year on June 30, beginning in 2024 and continuing through 2027. To develop this fund, Morgan intends to make equal contributions on June 30 of each of the years 2020–2023.

Click here to view factor tables How much must the balance of the fund equal on June 30, 2023, in order for Morgan to satisfy his objective? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Balance of the fund equal on June 30, 2023 $ LINK TO TEXT LINK TO VIDEO

Click here to view factor tables What are each of Morgan’s contributions to the fund? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Morgan’s contributions to the fund $

Answer 1

Answer:

(A)

Annual withdrawal from from = 2024 to 2027 = 16000

Number of withdrawal= 4

Annual interest rate= 9%

Fund balance of June 30 2023= present value of annual withdrawal.

=. Uniform withdrawal* (1-(1+r)^-n)/r

=16000*(1-1.09^-4)/0.09

=16000*3.23972(see annuity table)= 51836

B)

Number of contribution = 4

Future value of contribution= 51836

Future value of annuity of 1= annual contribution*((1+r)ⁿ​​​​​-1)/r

=51836=annual contribution*(1.09⁴​​​​​​​​​​​​ -1)/0.09

Annual contribution = 51836/4.573129= 11334