Question

Steve, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on a 10% basis that will enable him to withdraw $50,000 per year on June 30 , beginning in 2029 and continuing through 2033 . To develop this fund, Steve intends to make equal contributions on June 30 of each of the years 2025−2028. Click here to view factor tables (a) ( Youranswer is incorrect. How much must the balance of the fund equal on June 30, 2029, in order for Steve to satisfy his objective? (Round foctor values to 5 decimal places, es. 1.25124 and final answer to 2 decimal places, es. 4.585.81.)

Answer 1

The balance of the fund must equal $305,246.25 on June 30, 2029, for Steve to satisfy his objective.

Step-by-step explanation:

To find how much the balance of the fund must equal on June 30, 2029, we need to calculate the future value of the withdrawals. The annual withdrawal of $50,000 each year starting in 2029 and continuing through 2033 can be viewed as an annuity. We will use the future value of an annuity formula:

FV = P × [(1 + r)^n - 1] / r

Where FV is the future value, P is the annual payment, r is the interest rate, and n is the number of years. In this case, P = $50,000, r = 10%, and n = 5. Plugging these values into the formula, we get:

FV = $50,000 × [(1 + 0.10)^5 - 1] / 0.10 = $305,246.25

Therefore, the balance of the fund must equal $305,246.25 on June 30, 2029, for Steve to satisfy his objective.