Answer to Question #135114 in Financial Math for jaya

Question #135114
John uses his retirement fund to buy a perpetuity-due of $20,000 per year based on an annual
nominal yield of interest i = 8% compounded monthly. Find John’s retirement fund.
1
Expert's answer
2020-09-28T09:13:35-0400

Nominal yield of interest=8%=8\% compounded monthly

So, effective rate of annual interest=(1+0.0812)121=8.299%=(1+\frac{0.08}{12})^{12}-1=8.299\%

Let retirement fund be R

Here, $20000=R+(R×0.08299×1)\$20000=R+(R\times0.08299\times1)

Hence, retirement fund, R=$18467.39R=\$18467.39


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