FNAN 303, Fall 2018, test 2, solutions
Find FV annuity PMT to fund an annuity due
2. K vli...
FNAN 303, Fall 2018, test 2, solutions
Find FV annuity PMT to fund an annuity due
2. K vlian has nothing saved for retirement. He wants to receive $81,000 each year
000 each year for 5 years during
retirement. The first of these payments will be received in 4 years. Kynan can
ceived in 4 years. Kylian can earn a return of 11.90
percent per year. How much does Kylian need to save each year for
Uw much does Kylian need to save each year for 4 years to have exactly enough
to meet his retirement goal if he makes his first annual savings contribution
contributions are equal?
A. $68,634 (plus or minus $10).
B. $51,661 (plus or minus $10)
C. $61,335 (plus or minus $10)
D. $78,308 (plus or minus $10)
E. None of the above is within $10 of the correct answer
Step 1: Determine how much savings needs to be accumulated by the time Kylian retires (A)
Step 2: Determine how much needs to be saved each year (?B) to accumulate the amount identified in step 1
Note that N (the number of savings contributions) in the first part of the problem (savings) is the
"new time 0” in the second part of the problem (withdrawing)
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