A client is celebrating his 50th b-day and wants to start saving for his anticipated retirement at age 65. he wants to be able to withdraw $20,000 from his saving account on his 66th b-day and each year for 19 more years after that.

After extensive research, the client determines that he can invest his money in an account that offers 5% interest per year with quarterly compounding. he wants to make equal annual payments on each b-day into the account - the first payment on his 51st b-day and his last on his 65th b-day.

In addition, the clients employer will contribute $2000 to the account each year (beginning on the clients 51st b-day) as part of the companies profit-sharing plan (a total of 15 contributions.)

The amount the client must deposit personally into the account each year on his b-day to enable him to make the desired wds at the retirement is closest to:

A. 9375

B. 9459

C. 11400

• First, we need to know how much he needs in his account on his 65th birthday.
  
  Annual effective rate = (1.0125)^4 – 1 = 5.0945%
  Future Value = 0
  n = 20
  Payment = 20,000
  Solve for Present Value = 247,259
  Now,
  calculate the required (total) payment:
  n = 15
  interest rate = 5.0945%
  Present Value = 0
  Future Value = 247,259
  Solve for Payment = $11,377
  Client’s contribution = $11,377 – $2,000 = $9,377.
  
  Answer: A) 9375.
  
  i think so it is nearer
  
  correct me if any...........
• 11 years agoHelpfull: Yes(9) No(4)
• tagtical question
  
  answer is(A)9375
• 11 years agoHelpfull: Yes(5) No(3)