Question

Mr. and Mrs. Hennesy met with their adviser and concluded that they would need $40,000 per year after they retire in order to live comfortably. They plan to retire 10 years from now and expect to enjoy 20-year of happy retirement before they go to the great beyond. How much should they deposit now in a bank account paying 9 percent to reach financial happiness during retirement

Answer 1

Mr. and Mrs. Hennesy

They should deposit $337,928.65 now.

Step-by-step explanation:

a) Data and Calculations:

Amount required per year after retirement = $40,000

Period of years during retirement = 20 years

Total amount required for 20 years = $800,000 ($40,000 * 20)

Interest rate = 9%

N (# of periods) 10

I/Y (Interest per year) 9

PMT (Periodic Payment) 0

FV (Future Value) 800000

Results

PV = $337,928.65

Total Interest $462,071.35