In their meeting with their advisor, Mr. and Mrs. O'Rourke concluded that they would need $40,000 per year during their retirement years in order to live comfortably. They will retire 10 years from now and expect a 20-year retirement period
How much should Mr. and Mrs. O'Rourke deposit now in a bank account paying 9 percent to reach financial happiness during retirement?
The amount of money required at the beginning of the retirement period is:
n = 20, i = 9%
PVA = (CF/r) × [1-1/(1+r)n] = (40,000/.09 ) × [1-1/(1.09 )20]= $365,142
n = 10, i = 9%
PV = 365,142(1.09 )-10 = $154,239.85
Business
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