Herbert has opened a retirement fund account which pays A percent interest and requires annual deposits of B at the beginning of each year. Herbert will retire in C years and expects 10 years of retirement life. What is the maximum annual retirement benefit Herbert can get at the end of each of his retirement years? Show all working.
| A | 8.00% | ||
| B | $ 4,448.00 | ||
| C | 9 | years |
Solution:
Future value of retirement fund at the time of retirement = $4,448 * Cumulative FV factor at 8% for 9 periods of annuity due
= $4,448 * 13.48656 = $59,988
Maximum annual retirement benefit herbert get at the end of year retirement year = $59,988 / Cumulative PV factor at 8% for 10 periods
= $59,988 / 6.71008
= $8,940
Herbert has opened a retirement fund account which pays A percent interest and requires annual deposits...