Question #138154

A man is planning to retire in 25 years. He wishes to deposit a regular amount every three

months until he retires, so that, beginning of one year following his retirement, he will

receive annual payments of $60,000 for the next 10 years. How much must he deposit if

the interest rate is 6 percent compounded quarterly?

months until he retires, so that, beginning of one year following his retirement, he will

receive annual payments of $60,000 for the next 10 years. How much must he deposit if

the interest rate is 6 percent compounded quarterly?

Expert's answer

**solution**

Present value of benefits at retirement

"Duration\\ n=10\\ years"

"Payments\\ p= 60,000"

"Interest\\ r=0.06"

Compounding is done quarterly. Therefore, the effective annual rate is

The deposits to be accumulated quarterly (every three months) should equal 438766.34272

"438,766.34273= 228.803*c"

"C= 1,917.6596"

*Answer. He must deposit $ 1,917.6596*

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