Week 3 Individual Assignments

Finance for Decision Making

FIN 419

Chapter 4: Problem 4-23 - Personal Finance Problem

Funding your retirement - You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive 20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year during the 30-year retirement period.

a. How large a fund will you need when you retire in 20 years to provide the 30-year, 20,000 retirement annuity?

173,880 will be required to retire in 20 years to provide the 30-year, 20,000 retirement annuity. Calculated as follows:

According to Gitman (2009), present value (annuity): (, )

PVA PMT x...