Homework Answers
Amount required on retirement is equal to present value of annuity
= 4000 + 4000*PVAF(5%, 19 years)
= 4000 + 4000*12.0853
= $52,341.2
Let the amount deposited be x
Future value of annuity = Annual amount*[{(1+r)^n – 1}/r]
52,341.2 = x*[{(1.04)^25 – 1}/0.04]
52,341.2 = 41.645908x
X= $1,256.81
Hence, the answer is E. X>1240
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