You drafted a financial plan to retire in 35 years from now and thinking about creating a fund that will allow you to receive $25,000 at the end of each year for 30 years after your retirement.

The interest rates are expected to be 3.45% per annum during the 35-year pre-retirement period, and 4.15% during the retirement period.

Required: (Show workings and explanations)

a) To provide the 30- year, $25,000 a year annuity, calculate how much should be in the fund account when you retire in 35 years.

b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn 3.75% per year during the 35-year pre-retirement period?

c) (Using different interest rates) Assume that the interest in the pre-retirement period is 3.5%, and in the post-retirement period, it is 4.05%. To fund the 30- year annual annuity payments of $25,000, how much do you need to save annually until retirement? (deposits are made at the end-of-year for 35 years).