(From section 6.2) You want to be able to withdraw $50,100 from your account each year for 20 years after you retire. You expect to retire in 35 years. If your investment account earns 5.5% interest, how much will you need to deposit into the account at the end of each year until you reach retirement to achieve your retirement goals? (a) The first part is finding how much we need to have in the account by the time we retire. Which formula will you use first? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = A or Po = r = (c) Write the formula you will use with the numbers plugged in below.
(From section 6.2) You want to be able to withdraw $50,100 from your account each year for 20 years after you retire. You expect to retire in 35 years. If your investment account earns 5.5% interest, how much will you need to deposit into the account at the end of each year until you reach retirement to achieve your retirement goals? (a) The first part is finding how much we need to have in the account by the time we retire. Which formula will you use first? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = A or Po = r = (c) Write the formula you will use with the numbers plugged in below.
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:### Educational Activity: Solving Annuity and Payout Problems
#### Instructions:
**(f)** Now that we've answered the first part of the problem, we still need to find how much we will deposit into the account each year while still working to reach our goal. Which formula will you use for the second part? Circle one.
- **Annuity**
- **Payout-Annuity**
**(g)** What are the following variables that we will need for the formula?
- PMT =
- n =
- t =
- r =
- A or Po =
**(h)** Write the formula you will use with the numbers plugged in below.
**(i)** Solve using your calculator or technology and round to two decimal places. **Work is not required here.** Write the answer here and state which variable you solved for.
**(j)** Using your own words, describe what you found by solving the equation in terms of the word problem given.
---
#### Notes:
The questions guide you through selecting the correct formula and identifying the necessary variables. Completing this exercise will help you solve the problem methodically and understand the practical application of annuities.
Transcribed Image Text:2. (From section 6.2) You want to be able to withdraw $50,100 from your account each year for 20 years after you retire. You expect to retire in 35 years. If your investment account earns 5.5% interest, how much will you need to deposit into the account at the end of each year until you reach retirement to achieve your retirement goals?
(a) The first part is finding how much we need to have in the account by the time we retire. Which formula will you use first? Circle one.
- Annuity
- Payout-Annuity
(b) What are the following variables that we will need for the formula?
- PMT =
- n =
- t =
- r =
- A or Po =
(c) Write the formula you will use with the numbers plugged in below.
(d) Solve using your calculator or technology and round to two decimal places. **Work is not required here.** Write the answer here and state which variable you solved for.
(e) Using your own words, describe what you found by solving the equation in terms of the word problem given.
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