Present value of annuity question?
On your 22 birthday, you make a wish that you will retire on your 65th birthday and live happily ever after. You want to accumulate enough by then to provide yourself with 600000 a year for 30 years and the first payment starting at 65th birthday. Interest rate is 9% How much must you accumulate by the time you retire? The answer is 6718970 But here is the question. How much must you save each year until retirement in order to finance you retirement consumption? Assume the savings are put aside on your birthday of each year, the first one is on your 29t birthday and the last one is 65th birthday? I know the working is like this for the annual saving 6718970 / (1+0.09)^37 Why is it ^37 and not to the power of 36 (65-29)
Public Comments
- suppose you make payments between 29th & 30th birthday (inclusive) you are making 2 payments, not (30-29) = 1 payment same applies to 29th-65th birthday (inclusive) and your payments form a G.P. with 37 terms
