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How do I answer this? The formula is too confusing. I am trying to find step by step instructions on how to solve. Thank you!

 

You plan to work for 40 years and then retire using a 25-year annuity. You want to arrange a retirement income of $5000 per month. You have access to an account that pays an APR of 6.0% compounded monthly. This requires a nest egg of $776,034.32.

What monthly deposits are required to achieve the desired monthly yield at retirement?

 May 12, 2019

Best Answer 

 #1
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FV=776034.32; R=0.06/12; N=40*12;PMT = FV*(((1 + R)^N - 1)^-1* R)

 PMT =$ 389.68 - Monthly deposits required for FV of the annuity =$776,034.32

 

N=25*12; R=0.06/12;PV=776034.32; PMT=PV*R*((1 + R)^N) / ((1 + R)^(N) - 1) 

MONTHLY ANNUITY PMT AT RETIREMENT =$ 5000

 May 12, 2019
 #1
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+2
Best Answer

FV=776034.32; R=0.06/12; N=40*12;PMT = FV*(((1 + R)^N - 1)^-1* R)

 PMT =$ 389.68 - Monthly deposits required for FV of the annuity =$776,034.32

 

N=25*12; R=0.06/12;PV=776034.32; PMT=PV*R*((1 + R)^N) / ((1 + R)^(N) - 1) 

MONTHLY ANNUITY PMT AT RETIREMENT =$ 5000

Guest May 12, 2019

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