5. A person 35 ages wishes to accumulate a fund for retirement by depositing an amount R at the end of each year into an account paying 4% interest. At age 65, the person will use the entire account balance to purchase a 15-year 5% annuity-immediate with annual payments of $10,000. Find R.
5. A person 35 ages wishes to accumulate a fund for retirement by depositing an amount R at the end of each year into an account paying 4% interest. At age 65, the person will use the entire account balance to purchase a 15-year 5% annuity-immediate with annual payments of $10,000. Find R.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:5.
A person 35 ages wishes to accumulate a fund for retirement by depositing an amount R at
the end of each year into an account paying 4% interest. At age 65, the person will use the entire
account balance to purchase a 15-year 5% annuity-immediate with annual payments of $10,000. Find
R.
Solution:
Expert Solution
Step 1
Working Note #1
n= 65-35=30 years
r=4%
Formula to be used=
Substituting the value in the formula, we have
=((1+4%)^30-1)/4%
=2.2433975100/4%
=56.08493775
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