4. Juan Masipag, a self-employed individual, is opening a retirement account at a bank. His goal is to accumulate Php 1,000,000 in the account by the time he retires from work in 20 years time. A local bank is willing to open a retirement account that pays 8% interest compounded annually throughout the 20 years. Juan expects that his annual income will increase by 6% yearly during his working career. He wishes to start with a deposit at the end of year 1 (A,) and increase the deposit at a rate of 6% each year thereafter. What should be the size of his first deposit (A,)? The first deposit will occur at the end of year 1, and the subsequent deposits will be made at the end of each year. The last deposit will be made at the end of year 20.
4. Juan Masipag, a self-employed individual, is opening a retirement account at a bank. His goal is to accumulate Php 1,000,000 in the account by the time he retires from work in 20 years time. A local bank is willing to open a retirement account that pays 8% interest compounded annually throughout the 20 years. Juan expects that his annual income will increase by 6% yearly during his working career. He wishes to start with a deposit at the end of year 1 (A,) and increase the deposit at a rate of 6% each year thereafter. What should be the size of his first deposit (A,)? The first deposit will occur at the end of year 1, and the subsequent deposits will be made at the end of each year. The last deposit will be made at the end of year 20.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 2STP
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Question
Topic: Geometric Gradient Series
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4. Juan Masipag, a self-employed individual, is opening a
retirement account at a bank. His goal is to accumulate
Php 1,000,000 in the account by the time he retires from
work in 20 years time. A local bank is willing to open a
retirement account that pays 8% interest compounded
annually throughout the 20 years. Juan expects that his
annual income will increase by 6% yearly during his working
càreer. He wishes to start with a deposit at the end of year 1
(A,) and increase the deposit at a rate of 6% each year
thereafter. What should be the size of his first deposit (A,)?
The first deposit will occur at the end of year 1, and the
subsequent deposits will be made at the end of each year.
The last deposit will be made at the end of year 20.
Single Payment
Compound
Present
Worth
Amount
Factor
F/P
Factor
P/F
1
1.080
.9259
.8573
.7938
1.166
3
1.260
.7350
.6806
4
1.360
1.469
6
7
1.587
1.714
.6302
.5835
.5403
8.
1.851
9
10
1.999
2.159
.5002
.4632
11
12
13
2.332
.4289
.3971
.3677
2.518
14
15
2.720
2.937
3.172
.3405
.3152
16
17
3.426
3.700
.2919
.2703
18
3.996
.2502
19
20
4.316
4.661
.2317
.2145
ODE
ANSWER:
(1+g
1+i
P, = A
g #i
i-g
20
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