To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns 65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first one right away, and makes deposits at the beginning of each year for 25 years. How much does he need to deposit each year in order to save enough to buy his annuity?
To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns 65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first one right away, and makes deposits at the beginning of each year for 25 years. How much does he need to deposit each year in order to save enough to buy his annuity?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:To ensure his retirement income, a 40-year old man plans to purchase annuity when he turns
65. The annuity will pay $7,500 at the end of each month for 20 years, and the value is
calculated at 5% interest, compounding monthly. To pay for this annuity, he starts making
annual level deposits in a mutual fund, which earns 8% interest each year. He makes the first
one right away, and makes deposits at the beginning of each year for 25 years. How much does
he need to deposit each year in order to save enough to buy his annuity?
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