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Imagine you are a financial advisor to Valerie VanNess. Ms . VanNess wants to retire in 2 5 years. She wants to start saving an
Imagine you are a financial advisor to Valerie VanNess. Ms VanNess wants to retire in
years. She wants to start saving an annual amount at the end of each year until she retires. She
expects to live for another years after she retires. During retirement she wants to withdraw
$ at the start of each year from a savings account. She can earn per year on
balances in this savings account
a Write out the formula that calculates the of regular
annuity.
If you use the PV annuity formula, at what
timeyear is the PV placed? Write out the formula that calculates the FV of a regular
annuity.
When the FV is calculated, in what year is the
FV placed
b How much will MsVanNess have to deposit in the savings account at the end of each
year for the next years, if the interest rate is compounded annually?
c How would the lyearly deposits be changed if Ms VanNess expects her cat to live for
another five years after her death, and she wants to leave an amount in an account that
will be used to pay the cat sitter $ at the start of each year, for those five years.
Draw a new timeline, or add to your timeline above
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