Answer to Question #182648 in Financial Math for PK NDINI

Question

Upon their retirement in a meeting with their advisor, Mr and Mrs moraba determined the amount that they will need in order to live comfortably. They expect a 20 year retirement period. How much should mr and Mrs moraba deposit now in a bank account paying 7,5% interest per year, compounded yearly to be able to withdraw the amount of R480 700 at the end of each year, starting one year from now?

Answer 1

$P_0=\frac{d(1-(1+r)^{-n})}{r}$

where P0 is the starting amount

d is the annual withdrawal

r is the annual rate of interest

n is the number of years.

$=\frac{480700*(1-(1+0.075)^{-20})}{0.075}$

=R4,900,492