Question
9-23: Don Ball is a 55-year-old engineer. According to mortality tables, a male at age 55 has an average life expectancy of 21 more years.
9-23: Don Ball is a 55-year-old engineer. According to mortality tables, a male at age 55 has an average life expectancy of 21 more years. Don has accumulated $48,500 toward his retirement. He is now adding $5000 per year to his retirement fund. The fund earns 12% interest. Don will retire when he can obtain an annual income from his retirement fund of $20,000, assuming he lives to age 76. He will make no provision for a retirement income after age 76 (i.e. he assumes he will be dead, nice thought, huh?). What is the youngest age at which Don can retire?
Suggestion: Use the cash flow diagram below to write an equation requiring the PW at Retirement (in year x) = the FV (in year x) of the retirement contributions. Another way of saying this is that the future value (in year x) of both the present $48,500 and the annual $5000 contributions must be equal to the present worth (in year x) of the $20,000 annual payments?
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