Question

akashi plans to save $30,000 per year until he retires. His first savings contribution to his retirement account is expected in 1 year from today. Takashi plans to retire in 6 years from today, immediately after making his last $30,000 contribution to his retirement account. He then plans to be retired for 6 years. Takashi expects to earn 8.0 percent per year in his retirement account, both before and during his retirement. If Takashi receives equal annual payments from his retirement account during his retirement with the first of these annual retirement payments received in 1 year after he retires and the last of these annual retirement payments received in 6 years after he retires, then how much can Takashi expect each of his annual retirement payments to be

Answer 1

$47,605.83

Step-by-step explanation:

future value of Takashi's savings = $30,000 x 7.3359 (FVIFA, 8%, 6 periods) = $220,077

the value of each distribution payment = $220,077 / 4.6229 (PVIFA, 8%, 6 periods) = $47,605.83

These are ordinary annuities, therefore, so we can find their annuity factors using a table.