Question
Hi, I have a question on the Bill's Retirement Annuity problem. the problem is The New England Patriots plan to provide a retirement annuity
Hi, I have a question on the Bill's Retirement Annuity problem. the problem is "The New England Patriots plan to provide a retirement annuity for their coach, Bill Belichick, who will retire in 10 years. When he retires, he will receive an end-of-year annuity of $150,000 for 20 years. In order to fund Bill's annuity, the Patriots plan to make equal annual end-of-year deposits into an account that will earn 7% per year. When the 20-year distribution period begins, they will move the money into a different account that will earn 10% per year. There will be no money left in the account at the end of 20 years. Note that the first deposit will be at the end of year 1 and the first distribution payment will be at the end of year 11."
Now the first part is to find the total amount accumulated. And based on some steps, the distribution period would have a PV of approx 1.2mil. Ive seen people say that the next move is to use that 1.2mil as a future value for the accumulation period calculation. Could someone explain this?
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