You build a retirement fund by continuously paying into the fund for 30 years, at a rate of 5,000 per year at an effective annual interest rate of 9%. After 30 years, you buy a 30-year annuity immediate with your fund at an effective annual interest rate of 8%. The annuity pays P after one year, and payments increase by 5% thereafter. Find P

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A: Excel Spreadsheet:

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A: In the given question we require to compute the present value of future cashflows from perpetuity.

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A: As per the facts, first contribution is done after one year so it is a case of Ordinary Annuity.…

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A: Future value of annuity due can be calculated by using this equation Future value of annuity due…

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A: The annual cash flow can be computed with the help of present value of annuity.

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A: Annuity means series of no. of finite payments which are same in size and made in equal intervals.…

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