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2. Mr. And Mrs. James would like to need $30,000 per year during their retirement periods to have a comfortable life. They as
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Answer #1

a)

The size of the fund to provide the 15 year $ 30,000 retirement annuity is calculated using the following equation

Size of the Annuity = Ax1(1+r) - 1] rx (1+r)

Size of the fund = $30,000 x [(1 +0.10) 15 – 1] 0.10 x (1 + 0.10)15

Size of the fund = $228,182.4

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b)

The single amount to be invested today to provide the retirement fund is calculated using the following equation

Future value investment = Present value x (1 + interest rate)

$228,182.4 = Present value x (1 +0.08) 20

Present value = $228,182.4 \div ( 1+0.08)20

Single amount to be invested today = $ 48956.12

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