Question
Juan Hernndez wants to open an account to finance his retirement in 10 years. Starting next year, you will make an annual deposit for 10
Juan Hernndez wants to open an account to finance his retirement in 10 years. Starting next year, you will make an annual deposit for 10 years, from year 1 to 10, in such a way that you can withdraw (6 months after your retirement) $600,000 semi-annually for the next 20 additional years (The last withdrawal falls at the end of the year 30). If the bank that manages the account pays 6% annual interest compounded semiannually, determine:
a) What type of capitalization would be used in the first 10 years?
discrete interperiod effective continuous b) What type of capitalization would be used in the last 20 years?
effective interperiod discrete continuous c) How many annual deposits should Mr. Hernndez make during the first 10 years? Answer
d) Assuming that during the first 10 years Juan deposits $550,000.00 annually, how much would be the total interest that his account will earn at the end of the tenth year? Answer
e) Assuming that after 10 years of depositing he accumulated a balance of $10,000,000.00, what is the maximum that Juan can withdraw every semester so that his money never runs out? Answer
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